1) Depreciation on office equipment would be included in product costs.
2) The account analysis method of cost estimation classifies account costs as fixed,
mixed, or variable using qualitative judgments.
3) The coefficient of determination (r2) measures the percentage of variation in X (the
independent variable) explained by Y (the dependent variable).
4) The additional cost of producing and transferring the product or service is called
variable manufacturing cost.
5) It is possible that the smallest customer in terms of revenue is the most profitable
customer.
6) Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its
costing system uses two cost categories, direct materials and conversion costs. Each
product must pass through the Assembly Department and the Testing Department.
Direct materials are added at the beginning of the production process. Conversion costs
are allocated evenly throughout production. Timekeeper Inc. uses weighted-average
costing.
Data for the Assembly Department for June 2015 are:
Costs for June 2015:
What is the total amount debited to the Work-in-Process account during the month of
June?
A) $225,000
B) $1,000,000
C) $1,135,000
D) $1,225,000
7) An unfavorable variable overhead efficiency variance indicates that ________.
A) the actual rate of variable overhead was more than budgeted rate
B) the price of variable overhead items was less than budgeted
C) the variable overhead cost-allocation base was not used efficiently
D) the variable overhead cost-allocation base was used efficiently
8) Chess Woods Limited produces two products: wooden chess pieces and wooden
inlaid chess boards. Under their traditional cost system using one cost driver (direct
manufacturing labor hours), the cost of a set of wooden chess pieces is $325.00. An
analysis of the activities and their costs revealed that three cost drivers would be used
under a new ABC system. These cost drivers would be equipment usage, storage area
for the material, and type of woods used. The new cost of a set of chess pieces was
determined to be $298.00 per set.
The goal of a properly constructed ABC system is to ________.
A) have the most accurate cost system
B) identify more indirect costs
C) develop the best cost system for an economically reasonable cost
D) have separate allocation rates for each department
9) Effectiveness is ________.
A) the relative amount of inputs used to achieve a given output level
B) the continuous process of comparing a firm’s performance levels against the best
levels of performance in competing companies
C) the degree to which a predetermined objective or target is met
D) is a practice whereby managers focus more closely on areas that are not operating as
expected and less closely on areas that are
10) Beryl Company sells 500 flash drives per week. Purchase-order lead time is 1 1/2
weeks and the economic-order quantity is 1,125 units. What is the reorder point?
A) 1,687.5 units
B) 937.5 units
C) 750 units
D) 1,125 units
11) The ________ adjusts individual job-cost records to account for underallocated or
overallocated overhead.
A) adjusted allocation-rate
B) proration approach
C) write-off to cost of goods sold approach
D) weighted-average cost approach
12) Stephanie’s Bridal Shoppe sells wedding dresses. The average selling price of each
dress is $1,000, variable costs are $400, and fixed costs are $90,000.
How many dresses are sold when operating income is zero?
A) 225 dresses
B) 150 dresses
C) 100 dresses
D) 90 dresses
13) Extracts from cost information of Hebar Corp.:
Which of the following statement is true of Hebar’s setup costs under traditional
costing?
A) L3 pack is undercosted by $5,550
B) L7 pack is undercosted by $5,450
C) L3 pack is overcosted by $5,550
D) L7 pack is overcosted by $5,550
14) Violet Sales Corp, reports the year-end information from 2016 as follows:
Violet is developing the 2016 budget. In 2016 the company would like to increase
selling prices by 3.5%, and as a result expects a decrease in sales volume of 15%. All
other operating expenses are expected to remain constant. Assume that cost of goods
sold is a variable cost and that operating expenses are a fixed cost.
What is budgeted sales for 2016?
A) $291,200
B) $246,330
C) $302,400
D) $322,000
15) The flexible-budget variance for variable costs is ________.
A) $19,200 unfavorable
B) $61,440 unfavorable
C) $52,800 favorable
D) $76,800 favorable