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. Assume that FIFO process costing is used. What is the
cost per equivalent unit for conversion?
a. $3.05
b. $3.87
c. $4.25
d. $6.40
StatPro Corporation
StatPro Corporation is a manufacturer of a versatile statistical calculator. The following
information is a summary of defective and returned units for the previous year.
Refer to StatPro Corporation. The total quality cost is
a. $15,000.
b. $15,750.
c. $28,500.
d. $11,250.
With two autonomous division managers, the price of goods transferred between the
divisions needs to be approved by
a. corporate management.
b. both divisional managers.
c. both divisional managers and corporate management.
d. corporate management and the manager of the buying division.
Rosewood Corporation
Rosewood Corporation produces a single product. The following cost structure applied
to its first year of operations:
Refer to Rosewood Corporation. Assume for this question only that Rosewood
Corporation manufactured and sold 5,000 units in the current year. At this level of
activity it had an income of $30,000 using variable costing. What was the sales price
per unit?
a. $16.00
b. $18.80
c. $12.80
d. $14.80
Today, traditional accounting methods are
a. still appropriate for financial reporting.
b. still appropriate for providing useful cost information to internal managers.
c. still appropriate for both internal and external financial reporting.
d. outdated for all purposes.
Material is added at the beginning of a process in a process costing system. The
beginning Work in Process Inventory for the process was 30 percent complete as to
conversion costs. Using the FIFO method of costing, the number of equivalent units of
material for the process during this period is equal to the
a. beginning inventory this period for the process.
b. units started and completed this period in the process.
c. units started this period in the process plus the beginning Work in Process Inventory.
d. units started and completed this period plus the units in ending Work in Process
Inventory.
Absorption costing differs from variable costing in all of the following except
a. treatment of fixed manufacturing overhead.
b. treatment of variable production costs.
c. acceptability for external reporting.
d. arrangement of the income statement.
In a decentralized company in which divisions may buy goods from one another, the
transfer pricing system should be designed primarily to
a. increase the consolidated value of inventory.
b. allow division managers to buy from outsiders.
c. minimize the degree of autonomy of division managers.
d. aid in the appraisal and motivation of managerial performance.
At the end of the last fiscal year, Drury Company had the following account balances:
If the most common treatment of assigning overapplied overhead were used, the final
balance in Cost of Goods Sold is:
a. $851,000.
b. $852,021.
c. $867,979.
d. $869,000.
Office Systems Corporation
Office Systems Corporation manufactures and sells various high-tech office automation
products. Two divisions of Office Systems Corporation are the Computer Chip Division
and the Computer Division. The Computer Chip Division manufactures one product, a
“super chip,” that can be used by both the Computer Division and other external
customers. The following information is available on this month’s operations in the
Computer Chip Division:
Presently, the Computer Division purchases no chips from the Computer Chips
Division, but instead pays $45 to an external supplier for the 4,000 chips it needs each
month.
Refer to Office Systems Corporation. Two possible transfer prices (for 4,000 units) are
under consideration by the two divisions: $35 and $40. Corporate profits would be ____
if $35 is selected as the transfer price rather than $40.
a. $20,000 larger
b. $40,000 larger
c. $20,000 smaller
d. the same
Kelly Company has 20,000 units in inventory that had a production cost of $4 per unit.
These units cannotbe sold through normal channels due to a significant technology
change. These units could be reworked at a total cost of $30,000 and sold for $35,000.
Another alternative is to sell the units to a junk dealer for $10,500. The relevant cost for
Kelly to consider in making its decision is
a. $80,000 of original product costs.
b. $30,000 for reworking the units.
c. $110,000 for reworking the units.
d. $35,000 for selling the units to the junk dealer.
Mapleton Company
Mapleton Company is considering an investment in a machine that would reduce
annual labor costs by $30,000. The machine has an expected life of 10 years with no
salvage value. The machine would be depreciated according to the straight-line method
over its useful life. The company’s marginal tax rate is 30 percent.
Refer to Mapleton Company. Assume the company pays $250,000 for the machine.
What is the expected internal rate of return on the machine? Present value tables or a
financial calculator are required.
a. between 8 and 9 percent
b. between 3 and 4 percent
c. between 17 and 18 percent
d. less than 1 percent
Strategic planning is
a. planning activities for promoting products for the future.
b. planning for appropriate assignments of resources.
c. setting standards for the use of important but hard-to-find materials.
d. stating and establishing long-term plans.
Process quality yield is used in the measurement of
a. throughput.
b. cash flows.
c. asset turnover.
d. profit margin.
Which ethical standard has been violated if an accountant fails to disclose relevant
information pertaining to a financial statement?
a. Competence
b. Confidentiality
c. Integrity
d. Credibility
Which of the following capacity levels has traditionally been used to compute the fixed
overhead application rate?
a. expected annual
b. normal
c. theoretical
d. prior year
The method of neglect handles spoilage that is
a. discrete and abnormal.
b. discrete and normal.
c. continuous and abnormal.
d. continuous and normal.
Donald Hughes has an opportunity to invest in a project that will yield four annual
payments of $12,000 with no salvage. The first payment will be received in exactly one
year. On low-risk projects of this type, Hughes requires a return of 6 percent. Based on
this requirement, the project generates a profitability index of 1.03953.
Present value tables or a financial calculator are required.
Which of the following statements is trueregarding capital budgeting methods?
a. The Fisher rate can never exceed a company’s cost of capital.
b. The internal rate of return measure used for capital project evaluation has more
conservative assumptions than the net present value method, especially for projects that
generate a positive net present value.
c. The net present value method of project evaluation will always provide the same
ranking of projects as the profitability index method.
d. The net present value method assumes that all cash inflows can be reinvested at the
project’s cost of capital.
The basis for measuring the cost of capital derived from bonds and preferred stock,
respectively, is the
a. pre-tax rate of interest for bonds and stated annual dividend rate less the expected
earnings per share for preferred stock.
b. pre-tax rate of interest for bonds and stated annual dividend rate for preferred stock.
c. after-tax rate of interest for bonds and stated annual dividend rate less the expected
earnings per share for preferred stock.
d. after-tax rate of interest for bonds and stated annual dividend rate for preferred stock.
A continuous loss
a. occurs unevenly throughout a process.
b. never occurs during the production process.
c. always occurs at the same place in a production process.
d. occurs evenly throughout the production process.
Texas Metal Company
Texas Metal Company has developed standard overhead costs based on a monthly
capacity of 180,000 machine hours as follows:
During November, 90,000 units were scheduled for production, but only 80,000 units
were actually produced. The following data relate to November:
Actual machine hours used were 165,000.
Actual overhead incurred totaled $1,378,000 ($518,000 variable plus $860,000 fixed).
All inventories are carried at standard cost.
Refer to Texas Metal Company. The variable overhead efficiency variance for
November was
a. $15,000 U.
b. $23,000 U.
c. $38,000 F.
d. $38,000 U.
Refer to Wyman Enterprises. For March, prime cost incurred was
a. $75,000.
b. $69,000.
c. $45,000.
d. $39,000.
Surfside Corporation
Surfside Corporation manufactures and sells two products: A and B. The operating
results of the company are as follows:
In addition, the company incurred total fixed costs in the amount of $9,000.
Refer to Surfside Corporation. If the company would have sold a total of 6,000 units,
consistent with CVP assumptions how many of those units would you expect to be
Product B?
a. 3,000
b. 4,000
c. 3,600
d. 3,500
Which of the following limits an organization’s ability to minimize the “gaps” found
when a gap analysis has been performed?
a. yes yes yes
b. yes no yes
c. no yes no
d. no no yes
Refer to Commodore Company. Using the four-variance approach, what is the variable
overhead efficiency variance?
a. $ 250 U
b. $ 250 F
c. $1,800 U
d. $1,800 F
At the end of the last fiscal year, Sheraton Company had the following account
balances:
If the most common treatment of assigning overapplied overhead were used, the final
balance in Cost of Goods Sold is:
a. $974,000.
b. $974,660.
c. $985,340.
d. $986,000.
In job-order costing, payroll taxes paid by the employer for factory employees are
commonly accounted for as
a. direct labor cost.
b. manufacturing overhead cost.
c. indirect labor cost.
d. administrative cost.
Performance reports are useful only to the extent that performance is measured against
a. a meaningful benchmark.
b. the performance of all other units or managers.
c. the budget as adopted for the period.
d. competitors’ achievements.
The organization whose primary function is to provide a means to share information
among cost and management accountants in the United States is the
a. Internal Revenue Service.
b. American Institute of CPAs.
c. Institute of Management Accountants.
d. Institute of Certified Management Accountants.
A firm’s discount rate is typically based on
a. the interest rates related to the firm’s bonds.
b. a project’s internal rate of return.
c. its cost of capital.
d. the corporate Aa bond yield.
Painter Corporation
Painter Corporation has the following information for the current month:
Refer to Painter Corporation. What are equivalent units of production for conversion
costs assuming weighted average is used?
a. 113,525
b. 114,400
c. 114,775
d. 115,650
Galveston Excursons Corporation
Galveston Excursons Corporation is considering the purchase of a new ocean-going
vessel that could potentially reduce labor costs of its operation by a considerable
margin. The new ship would cost $600,000 and would be fully depreciated by the
straight-line method over 15 years. At the end of 15 years, the ship will have no value
and will be scuttled. Galveston Excursons’ cost of capital is 14 percent, and its marginal
tax rate is 35 percent.
Refer to Galveston Excursons Corporation. What is the present value of the
depreciation tax benefit of the new ship? (Round to the nearest dollar.) Present value
tables or a financial calculator are required.
a. $ 85,991
b. $159,697
c. $210,000
d. $245,688
The sum of the material price variance (calculated at point of purchase) and material
quantity variance equals
a. the total cost variance.
b. the material mix variance.
c. the material yield variance.
d. no meaningful number.
Which of the following is typically regarded as a cost driver in traditional accounting
practices?
a. number of purchase orders processed
b. number of customers served
c. number of transactions processed
d. number of direct labor hours worked
Managers have noability to control the budget variance.
A responsibility accounting system should include all revenues and costs of a division.
The margin of safety is an effective measure of risk for a company.
It is notnecessary to prepare the Cost of Goods Manufactured statement prior to
preparing the Cost of Goods Sold statement.
In an outsourcing decision, rent received from an outside party for facility use is a
relevant cash inflow.
Under the realized value approach, no value is recognized for by-products or scrap until
they are actually sold.
Expected standards are a valuable tool for motivation and control.
Ecology Solutions Corporation
The Green Division of Ecology Solutions Co. has developed a wind generator that
requires a special “S” ball bearing. The Ball Bearing Division of Ecology Solutions Co.
has the capability to produce such a ball bearing.
Unfortunately, the Ball Bearing Division is operating at capacity and will need to
reduce production of another existing product, the “T” bearing, by 1,000 units per
month to provide the 600 “S” bearings needed each month by the Green Division. The
“T” bearing currently sells for $50 per unit. Variable costs incurred to produce the “T”
bearing are $30 per unit; variable costs to produce the new “S” bearing would be $60
per unit.
The Green Division has found an external supplier that would furnish the needed “S”
bearings at $100 per unit. Assume that both the Green Division and Ball Bearing
Division are independent, autonomous investment centers.
Refer to Ecology Solutions Co. What is the maximum price per unit that Green
Division would be willing to pay the Ball Bearing Division for the “S” bearing?
In a just-in-time (JIT) environment, design changes must be made early in the
production process.
A ______________________________ is a planning document that presents expected
variable and fixed overhead costs at different activity levels.
A hybrid costing system would be appropriate for a company that manufactures cake
flour.
The actual time taken to perform all necessary manufacturing functions in a process is
referred to as _________________________.