1) The variable-overhead spending and efficiency variances are:
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
2) Cartwright Graphics uses a special purpose paper on 80% of its jobs. The paper is
purchased in 100-sheet packages at a cost of $100 per package. Management estimates
that the cost of placing and receiving a typical order is $15, and the annual cost of
carrying a package in inventory is $1.50. Cartwright uses 2,600 packages each year.
Production is constant, and the lead time to receive an order is 1 week.
The economic order quantity is approximately:
A.203 packages
B.225 packages
C.228 packages
D.565 packages
E.631 packages
3) The Sarbanes-Oxley Act established the:
A.Securities and Exchange Commission (SEC)
B.Public Company Accounting Oversight Board (PCAOB)
C.Financial Accounting Standards Board (FASB)
D.Institute of Management Accountants (IMA)
E.American Accounting Association (AAA)
4) Consider the following statements about time and material pricing:
I. The time charge includes the direct cost of an employee’s time.
II. The time charge includes an amount to cover various overhead costs.
III. The material charge includes a handling charge for material.
Which of the above statements is (are) true?
A.I only
B.I and II
C.I and III
D.II and III
E.I, II, and III
5) Falcon Enterprises, which manufactures lawn mowers, recently installed a
just-in-time purchasing system and an activity-based management program.
Required:
A. Determine whether the following items would be apt to increase or decrease as a
result of the just-in-time system:
1> Inventory storage costs.
2> Number of suppliers used.
3> Number of raw material shipments handled.
4> Dollars available for alternative investment opportunities.
5> Quality of raw materials purchased.
B. Identify the following items as value-added activities, non-value-added activities, or
both.
1> Attaching the engine to the mower’s body.
2> Installing a new air-conditioning system in the executive offices.
3> Replacing a defective wheel with a new wheel.
4> Designing and printing an owner’s instruction manual for a new model.
5> Moving completed mowers to the finished-goods warehouse.
6> Attaching the handle to the mower’s body. The process took longer than normal
because of a worker slowdown caused by disgruntled employees.
6) Yang Manufacturing, which uses the high-low method, makes a product called Yin.
The company incurs three different cost types (A, B, and C) and has a relevant range of
operation between 2,500 units and 10,000 units per month. Per-unit costs at two
different activity levels for each cost type are presented below.
The cost types shown above are identified by behavior as:
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
7) Which of the following would likely be considered an internal user of accounting
information rather than an external user?
A.Stockholders
B.Consumer groups
C.Lenders
D.Middle-level managers
E.Government agencies
8) Sunshine Valley Meat Company produces one of the best sausage products in
Pennsylvania. The company’s controller compiled the following information by
analyzing the accounting records:
1> Meat costs the company $3.25 per pound of sausage produced.
2> Compensation of production employees is $2.25 per pound of sausage produced.
3> Supervisory salaries total $23,000 per month.
4> The company incurs utility costs of $9,000 per month plus $0.35 per pound of
sausage produced.
5> Insurance and property taxes average $6,400 per month.
Required:
A. Classify each cost as variable, fixed, or semivariable.
B. Write a formula to express the behavior of the firm’s production costs. (Use the form
Y = a + bX, where X denotes the quantity of sausage produced.)
9) Indiana Company incurred the following costs during the past year when planned
production and actual production each totaled 20,000 units:
Indiana’s per-unit inventoriable cost under variable costing is:
A.$9.50
B.$25.00
C.$28.00
D.$33.00
E.$40.50
10) When computing the conversion cost per equivalent unit under the
weighted-average method of process costing, all of the following information would be
needed except:
A.the number of units completed during the current accounting period
B.the conversion work performed during the current period on the ending
work-in-process inventory
C.the conversion work performed during the current period on the beginning
work-in-process inventory
D.the conversion cost in the beginning work-in-process inventory
E.the conversion cost incurred during the current accounting period
11) Present several examples of managerial accounting information that could help a
manager make each of the following decisions:
A. A manufacturing company is currently making a part that is a production headache.
The firm is deciding whether to abandon production and buy the part from an outside
supplier.
B. An operator of fast-food restaurants is deciding whether to open a new store in
Dallas.
Note: Many correct answers are possible.
12) Which of the following would depict the logical order for preparing (1) a
production budget, (2) a cash budget, (3) a sales budget, and (4) a direct-labor budget?
A.1-3-4-2
B.2-3-1-4
C.2-1-3-4
D.3-1-4-2
E.3-1-2-4
13) Unit costs in a process-costing system are derived by using:
A.in-process units
B.completed units
C.physical units
D.equivalent units
14) Distinguishing between controllable and noncontrollable costs on a performance
report may result in:
A.an increase in the effectiveness of a cost management system
B.a decrease in goal congruent behavior by managers
C.an increase in the quality of performance information
D.an increase in feelings of blame by managers
E.an increase in the effectiveness of a cost management system and an increase in the
quality of performance information
15) Yang Manufacturing, which uses the high-low method, makes a product called Yin.
The company incurs three different cost types (A, B, and C) and has a relevant range of
operation between 2,500 units and 10,000 units per month. Per-unit costs at two
different activity levels for each cost type are presented below.
The cost formula that expresses the behavior of Yang’s total cost is:
A.Y = $0 + $17X
B.Y = $20,000 + $13X
C.Y = $40,000 + $9X
D.Y = $45,000 + $4X
E.Y = $60,000 + $5X
16) Which of the following tools is not associated with cost estimation?
A.Least-squares regression
B.Multiple regression
C.Inversion equations
D.Time and motion (engineering) studies
E.Learning curves
17) A profitability index can be used to rank investment proposals.
Required:
A. Define the profitability index.
B. Two projects are under consideration. Project I has a net present value of $20,000
whereas project II has a net present value of $200,000. Which project is better? Explain.
What weakness in a net-present-value analysis does the profitability index address?
18) Consider the following statements about service department costs:
I. The costs of the Human Resources Department in a manufacturing organization must
be allocated to production departments in order to achieve a correct costing of
inventory.
II. The allocation of service department costs requires that an organization select both
an allocation base and an allocation method.
III. Service department cost allocations are more relevant for firms involved in service
industries (e.g., repair, health care) than for those involved with manufacturing.
Which of the above statements is (are) correct?
A.I only
B.II only
C.I and II
D.II and III
E.I, II, and III
19) Which of the following statements regarding the Sarbanes-Oxley Act is (are) true?
A.Management must establish and maintain a system of internal controls over financial
reporting
B.Management must periodically assess a company’s system of internal controls over
financial reporting
C.Management must include in the company’s annual report a separate report that
assesses internal controls
D.A company’s auditors are required to report on management’s assessment of internal
controls
E.All of the other answers are correct
20) The break-even point is that level of activity where:
A.variable cost equals fixed cost
B.contribution margin equals fixed cost
C.total contribution margin equals the sum of variable cost plus fixed cost
D.sales revenue equals total variable cost
E.sales revenue equals fixed cost
21) Boxworth and Associates designs relatively small sports stadiums and arenas at
various sites throughout the country. The firm’s accountant prepared the following
budget for the upcoming year:
Eighty percent of professional staff salaries are directly traceable to client projects, a
figure that falls to 60% for the administrative support staff and other operating costs.
Traceable costs are charged directly to client projects; nontraceable costs, on the other
hand, are treated as firm overhead and charged to projects by using a predetermined
overhead application rate.
Boxworth had one project in process at year-end: an arena that was being designed for
Charlotte County. Costs directly chargeable to this project were:
Required:
A. Determine Boxworth’s overhead for the year and the firm’s predetermined overhead
application rate. The rate is based on costs directly chargeable to firm projects.
B. Compute the cost of the Charlotte County arena project as of year-end.
C. Present three examples of “other operating costs” that might be directly traceable to
the Charlotte County project.
22) Consider the following cost items:
1> Sales commissions earned by a company’s sales force.
2> Raw materials purchased during the period.
3> Current year’s depreciation on a firm’s manufacturing facilities.
4> Year-end completed production of a carpet manufacturer.
5> The cost of products sold to customers of an apparel store.
6> Wages earned by machine operators in a manufacturing plant.
7> Income taxes incurred by an airline.
8> Marketing costs of an electronics manufacturer.
9> Indirect labor costs incurred by a manufacturer of office equipment.
Required:
A. Evaluate the costs just cited and determine whether the associated dollar amounts
would appear on the firm’s balance sheet, income statement, or schedule of cost of
goods manufactured.
B. What major asset will normally be insignificant for service enterprises and relatively
substantial for retailers, wholesalers, and manufacturers? Briefly discuss.
C. Briefly explain the similarity and difference between the merchandise inventory of a
retailer and the finished-goods inventory of a manufacturer.
23) Song, Inc., uses the high-low method to analyze cost behavior. The company
observed that at 22,000 machine hours of activity, total maintenance costs averaged
$33.40 per hour. When activity jumped to 25,000 machine hours, which was still within
the relevant range, the average total cost per machine hour was $30.40.
On the basis of this information, the fixed cost was:
A.$184,800
B.$210,000
C.$550,000
D.$734,800
E.$760,000
24) Bison Sporting Goods sells bicycles throughout the northeastern United States. The
following data were taken from the most recent quarterly sales forecast:
On the basis of the information presented, how many bicycles should the company
purchase in August?
A.1,860
B.1,950
C.2,040
D.2,250
E.None of the other answers are correct
25) Prime costs are comprised of:
A.direct materials and manufacturing overhead
B.direct labor and manufacturing overhead
C.direct materials, direct labor, and manufacturing overhead
D.direct materials and direct labor
E.direct materials and indirect materials
26) Companies that use a process-cost accounting system would:
A.establish a separate Work-in-Process Inventory account for each manufacturing
department
B.establish a separate Finished-Goods Inventory account for each manufacturing
department
C.pass completed production directly to Cost of Goods Sold
D.charge goods produced with actual overhead amounts rather than applied overhead
amounts
E.eliminate the need for the Finished-Goods Inventory account
27) Miller Company has an operating leverage factor of 5 . Which of the following
statements is true?
Thus, an 8% change in ______ should result in a 40% change in _____. The respective
amounts that change are:
A.An 8% change in income should result in a 40% change in sales revenue
B.An 8% change in sales revenue should result in a 40% change in income
C.An 8% change in variable costs should result in a 40% change in contribution margin
D.An 8% change in fixed costs should result in a 40% change in income
E.An 8% change in variable costs should result in a 40% change in break-even sales
28) Which of the following individuals is least likely to become involved in the setting
of either direct material standards or direct labor standards?
A.The purchasing manager
B.A production supervisor
C.An engineer
D.A machine operator
E.A company’s president
29) Gregory, which uses a process-costing system, adds all material at the beginning of
production and incurs conversion cost evenly throughout manufacturing. The
information that follows relates to the period just ended:
Units started and completed: 75,000
Units in ending work-in-process inventory: 15,000, 60% complete
Which of the following choices correctly expresses the total equivalent units of
production with respect to material and conversion cost?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E