1) Which of the following methods of cost estimation relies on only two data points?
A.Least-squares regression
B.The high-low method
C.The visual-fit method
D.Account analysis
E.Multiple regression
2) Which of the following is not a function of the treasurer?
A.Safeguarding assets
B.Managing investments
C.Preparing financial statements
D.Being responsible for an entity’s credit policy
E.Raising capital
3) A recent income statement of Suni Corporation reported the following data:
If these data are based on the sale of 20,000 units, the break-even point would be:
A.7,500 units
B.11,628 units
C.12,500 units
D.33,333 units
E.None of the other answers is correct
4) St. James, Inc., currently uses traditional costing procedures, applying $800,000 of
overhead to products Beta and Zeta on the basis of direct labor hours. The company is
considering a shift to activity-based costing and the creation of individual cost pools
that will use direct labor hours (DLH), production setups (SU), and number of parts
components (PC) as cost drivers. Data on the cost pools and respective driver volumes
follow.
The overhead cost allocated to Beta by using activity-based costing procedures would
be:
A.$240,000
B.$356,000
C.$444,000
D.$560,000
E.None of the other answers is correct
5) A typical job-cost record would provide information about all of the following items
related to an order except:
A.the cost of direct materials used
B.administrative costs
C.direct labor costs incurred
D.applied manufacturing overhead
E.direct labor hours worked
6) On a segmented income statement, common fixed expenses will have an effect on a
company’s:
A.segment contribution margin
B.profit margin controllable by the segment manager
C.segment profit margin
D.segment contribution margin and segment profit margin
E.None of the other answers are correct
7) The Razooks Company, which manufactures office equipment, is ready to introduce
a new line of portable copiers. The following copier data are available:
What price will the company charge if the firm uses cost-plus pricing based on
absorption cost and a markup percentage of 120%?
A.$420
B.$459
C.$594
D.$672
E.None of the other answers are correct
8) Millage Manufacturing has a cash balance of $8,000 on August 1 of the current year.
The company’s controller forecast the following cash receipts and cash disbursements
for the upcoming two months of activity:
Management desires to maintain a minimum cash balance of $8,000 at all times. If
necessary, additional financing can be obtained in $1,000 multiples at a 12% interest
rate. All borrowings are made at the beginning of the month; debt retirement, on the
other hand, occurs at the end of the month. Interest is paid at the time of repaying loan
principal and is computed on the portion of debt repaid.
Required:
A. Determine the ending cash balance in August both before and after any necessary
financing or debt retirement.
B. Repeat part “A” for September.
9) 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
10) Which of the following is (are) example(s) of a mixed cost?
I. A building that is used for both manufacturing and sales activities.
II. An employee’s compensation, which consists of a flat salary plus a commission.
III. Depreciation that relates to five different machines.
IV. Maintenance cost that must be split between sales and administrative offices.
A.I only
B.II only
C.I and III
D.I, III, and IV
E.I, II, III, and IV
11) The estimates used to calculate the predetermined overhead rate will virtually
always:
A.prove to be correct
B.result in a year-end balance of zero in the Manufacturing Overhead account
C.result in overapplied overhead that is closed to Cost of Goods Sold if it is immaterial
in amount
D.result in underapplied overhead that is closed to Cost of Goods Sold if it is
immaterial in amount
E.result in either underapplied or overapplied overhead that is closed to Cost of Goods
Sold if it is immaterial in amount
12) Consider the following costs that relate to a bank and a manufacturer of software:
Bank
1> Review costs of commercial loan applications
2> Operating costs of human resources department
3> Immediate processing costs of a specific customer’s cash deposit
4> Bank membership costs of joining local Chamber of Commerce
Software manufacturer
5> Label and packaging charges from a commercial printer for a new software release
6> Air conditioning/heating costs of the firm’s production plant
7> Transport costs of moving the finished products from production run no. 1 to the
company’s warehouse
8> Design and development costs of new spreadsheet software
Required:
A. Classify the eight costs listed as arising from either a unit-level, batch-level,
product-sustaining, or facility-level activity.
B. Would number of loan applications or number of customers be a more appropriate
cost-driver base for #1 above? Briefly explain.
13) Which of the following variances are most similar with respect to the manner in
which they are calculated?
A.Labor rate variance and labor efficiency variance
B.Material price variance and material quantity variance
C.Material price variance, material quantity variance, and total material variance
D.Material price variance and labor efficiency variance
E.Material quantity variance and labor efficiency variance
14) Riverside Florists uses an activity-based costing system to compute the cost of
making floral bouquets and delivering the bouquets to its commercial customers.
Company personnel who earn $180,000 typically perform both tasks; other firm-wide
overhead is expected to total $70,000. These costs are allocated as follows:
Riverside anticipates making 20,000 bouquets and 4,000 deliveries in the upcoming
year.
The cost of wages and salaries and other overhead that would be charged to each
bouquet made is:
A.$7.15
B.$8.75
C.$12.50
D.$13.75
E.None of the other answers is correct
15) Consider the following statements about absorption- and variable-costing income:
I. Yearly income reported under absorption costing will differ from income reported
under variable costing if production and sales volumes differ.
II. In the long-run, total income reported under absorption costing will often be close to
that reported under variable costing.
III. Differences in income under absorption and variable costing can often be reconciled
by multiplying the change in inventory (in units) by the variable manufacturing
overhead cost per unit.
Which of the above statements is (are) true?
A.I only
B.II only
C.III only
D.I and II
E.II and III
16) Dexter, Inc. manufactures various lines of computer equipment and is planning to
introduce a new line of laptops. Current plans call for the production and sale of 1,000
units, with estimated costs as follows:
The average amount of capital invested in the laptop product line is $900,000 and
Dexter’s target return on investment is 18%.
What price must Dexter charge if the company uses cost-plus pricing based on total
variable cost?
A.$712
B.$900
C.$1,030
D.$1,192
E.None of the other answers are correct
17) Which of the following can be linked to a wave of corporate scandals that took
place not too long ago?
A.Greedy corporate executives
B.Managers who made over-reaching business deals
C.Lack of oversight by companies’ audit boards and boards of directors
D.Shoddy work by external auditors
E.All of these
18) Hanks Company uses a standard cost system and applies manufacturing overhead to
products on the basis of machine hours. The following information is available for the
year just ended:
Standard variable-overhead rate per machine hour: $2.50
Standard fixed-overhead rate per machine hour: $5.00
Planned activity during the period: 30,000 machine hours
Actual production: 10,700 finished units
Production standard: Three machine hours per unit
Actual variable overhead: $86,200
Actual total overhead: $225,500
Actual machine hours worked: 35,100
Required:
A. Calculate the budgeted fixed overhead for the year.
B. Did Hanks spend more or less than anticipated for fixed overhead? How much?
C. Was variable overhead under- or overapplied during the year? By how much?
D. Was Hanks efficient in its use of machine hours? Briefly explain.
E. Would the company’s efficiency or inefficiency in the use of machine hours have any
effect on Hanks’ overhead variances? If “yes,” which one(s)?
19) Which of the following are methods for setting standards?
A.Analysis of historical data and goal congruence
B.Task analysis and matrix application forms
C.Task analysis and the analysis of historical data
D.Matrix application forms and analysis of historical data
E.Goal congruence and task analysis
20) The following data relate to the Lisle Company for May and August of the current
year:
May and August were the lowest and highest activity levels, and Lisle uses the high-low
method to analyze cost behavior. Which of the following statements is true?
A.The variable maintenance cost is $43 per hour
B.The variable maintenance cost is $45 per hour
C.The variable maintenance cost is $47 per hour
D.The fixed maintenance cost is $725,000 per month
E.More than one of the other answers is true
21) Mohammed Products has determined that the number of machine hours worked
(MH) drives the amount of manufacturing overhead incurred (MOH). On the basis of
this relationship, a staff analyst has constructed the following regression equation:
MOH = 240,000 + 8MH
Which of the choices correctly depicts the nature of Mohammed’s variables?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
22) Pruitt Company has developed an integrated system that coordinates the flow of all
goods, services, and information into and out of the organization, working with raw
material vendors as well as customers to improve service and reduce costs. The firm is
said to be using:
A.participative management
B.top-down management
C.strategic cost management
D.supply chain management
E.management by objectives (MBO)
23) Which of the following choices correctly indicates the use of the standard price per
unit of direct material when calculating the materials price variance and the material
quantity variance?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
24) Lone Star has computed the following unit costs for the year just ended:
Under absorption costing, each unit of the company’s inventory would be carried at:
A.$35
B.$55
C.$65
D.$84
E.None of the other answers are correct
25) Seymore Company has two service departments (Cafeteria and Human Resources)
and two production departments (Machining and Assembly). The number of employees
in each department follows.
Seymore uses the step-down method of cost allocation and allocates cost on the basis of
employees. Human Resources cost amounts to $1,200,000, and the department provides
more service to the firm than Cafeteria. How much Human Resources cost would be
allocated to Assembly?
A.$0
B.$480,572
C.$444,444
D.$666,666
E.None of the other answers are correct
26) Midtown Division, which is part of Courtyard Enterprises, recently reported a sales
margin of 30% and an ROI of 21%.
Required:
A. Briefly define sales margin, capital turnover, and return on investment.
B. Assume that Midtown has residual income of $220,000 and that Courtyard uses an
imputed interest rate of 10%. Compute Midtown’s capital turnover and invested capital.
C. In answering this question, ignore the assumptions stated in in requirement “B,” and
your answer. Instead, assume that Midtown’s invested capital amounted to $2,500,000.
On the basis of this information, calculate income and sales revenue.