1) Effort refers to physical exertion, such as a worker producing at a faster rate, but
excludes non-physical aspects like acumen and diligence of a worker.
2) The cash budget is a schedule of expected cash receipts and disbursements.
3) As ABC systems get very detailed and more cost pools are created, more allocations
are necessary to calculate activity costs for each cost pool, which increases the chances
of misidentifying the costs of different activity cost pools.
4) Variable costs are costs that vary, in total, in direct proportion to changes in the
volume or level of activity.
5) Tracing more costs as direct costs to value streams is impossible because companies
using lean accounting do not dedicate resources to individual value streams.
6) Spending more on the design phase of a new product usually reduces subsequent
product-related costs.
7) Decentralization in multinational companies may lead to lack of control.
8) A budget is a qualitative expression of a plan.
9) The supply chain describes the flow of goods, services, and information from the
initial sources of materials and services to the delivery of products to consumers.
10) Budgeting for a multinational company is made more complex due to the possibility
of exchange rate fluctuations.
11) A unit cost is also called an average cost.
12) Just-in-time systems are similar to materials requirement planning systems as both
systems are demand-pull systems.
13) Which of the following is true of benchmarking two managers against each other if
they carry out similar operations?
A) It would lead to better cooperation among the managers.
B) It would reduce the managers’ incentives to help one another.
C) It would enhance the accomplishment of organization goals.
D) It would help reduce costs common to both the departments.
14) 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 conversion cost per equivalent unit in June?
A) $552.00
B) $541.24
C) $441.24
D) $428.00
15) Which of the following is a guideline used by management accountants to assist in
strategic and operational decision making?
A) employing a cost-benefit approach
B) employing a supply chain approach
C) employing a six sigma approach
D) employing a regression approach
16) For each of the following, identify whether it BEST relates to market-based,
cost-based, negotiated, or all types of transfer pricing.
________a.Bargaining between selling and buying units
________b.Budgeted costs
________c.145% of full costs
________d.Internal product transfers are required if goods are available internally
________e.Manufacturing costs plus marketing costs plus distribution costs
plus customer service costs
________f.Prices listed in a trade journal
________g.Selling price less normal sales commissions
________h.Variable manufacturing cost plus a markup
17) Lukehart Industries, Inc., produces air purifiers. Lukehart, Inc., produces the air
purifiers in batches. To manufacture a batch of the purifiers, Lukehart, Inc., must set up
the machines and assembly line tooling. Setup costs are batch-level costs because they
are associated with batches rather than individual units of products. A separate Setup
Department is responsible for setting up machines and tooling for different models of
the air purifiers.
Setup overhead costs consist of some costs that are variable and some costs that are
fixed with respect to the number of setup-hours. The following information pertains to
June 2015:
Calculate the spending variance for variable overhead setup costs.
A) $150 unfavorable
B) $150 favorable
C) $264 unfavorable
D) $264 favorable
18) Zephyr Apparels is a clothing retailer. Unit costs associated with one of its products,
Product DCT121, are as follows:
What are the inventoriable costs per unit associated with Product DCT121?
A) $137
B) $140
C) $143
D) $88
19) The Allianz Company produces a specialty wood furniture product, and has the
following information available concerning its inventory items:
Relevant ordering costs per purchase order$450
Relevant carrying costs per year for each package:
Required annual return on investment15%
Required other costs per year$4
Annual demand is 30,000 packages per year. The purchase price per package is $48.
What is the annual relevant ordering costs?
A) $5,196
B) $8,695
C) $6,971
D) $9,547
20) A manufacturing plant produces two product lines: golf equipment and soccer
equipment. An example of indirect cost for the soccer equipment line is the ________.
A) material used to make the soccer balls
B) labor to shape the leather used to make the soccer ball
C) material used to manufacture the soccer studs
D) salary paid to plant supervisor
21) Sherry and John Enterprises are using the kaizen approach to budgeting for 2015.
The budgeted income statement for January 2015 is as follows:
Under the kaizen approach, cost of goods sold and variable operating expenses are
budgeted to decline by 1% per month.
What is the budgeted operating income for February 2015?
A) $206,000
B) $297,500
C) $116,915
D) $594,000
22) Greene Manufacturing incurred the following expenses during 2015:
What will be the breakeven point in units if absorption costing is used?
A) 1,330 units
B) 1,000 units
C) 887 units
D) 563 units
23) Give examples of bundled products for each of the following industries:
a.Resort hotel
b.Bank
c.Restaurant
d.Computer store
e.Super markets
f.Personal care products manufacturer
24) Coroid Corporation used the following data to evaluate their current operating
system. The company sells items for $11 each and had used a budgeted selling price of
$12 per unit.
What is the static-budget variance of operating income?
A) $238,000 favorable
B) $238,000 unfavorable
C) $235,000 favorable
D) $235,000 unfavorable
25) Big Bernard Corporation was recently formed to produce a semiconductor chip that
forms an essential part of the personal computer manufactured by a major corporation.
The direct materials are added at the start of the production process while conversion
costs are added uniformly throughout the production process. June is Big Bernard’s first
month of operations, and therefore, there was no beginning inventory. Direct materials
cost for the month totaled $935,000, while conversion costs equaled $4,552,000.
Accounting records indicate that 475,000 chips were started in June and 425,000 chips
were completed.
Ending inventory was 50% complete as to conversion costs.
Required:
a.What is the total manufacturing cost per chip for June?
b.Allocate the total costs between the completed chips and the chips in ending
inventory.
26) The top management at Groundsource Company, a manufacturer of lawn and
garden equipment, is attempting to recover from a fire that destroyed some of their
accounting records. The main computer system was also severely damaged. The
following information was salvaged:
Tractor Division Tiller Division Digger Division
Sales $10,000,000 (a) $2,400,000
Net operating income $1,000,000 $1,440,000 $600,000
Operating assets (b) (c) $2,000,000
Return on investment 0.2 0.1 (d)
Return on sales (e) 0.12 0.25
Investment turnover (f) (g) 1.2
What is the Tractor Division’s investment turnover?
A) .50
B) 1.0
C) 2.0
D) 2.5
27) When should an overtime premium of direct manufacturing labor be considered an
indirect manufacturing cost? A direct manufacturing cost?
28) The successful management accountant possesses several skills and characteristics
that reach well beyond
basic analytical abilities. Discuss.
29) Describe operating and financial budgets and give at least two examples of each
discussed in the textbook.
30) What are distress prices and which transfer prices should be used for judging
performance if distress prices prevail?
31) What are the relevant cash inflows and outflows for capital budgeting decisions?
32) Should a company allocate its corporate costs to divisions?
33) What are the two components of the sales-volume variance?
34) Cowley County Hospital uses a job-costing system for all patients who have
surgery. In March, the pre-operating room (PRE-OP) and operating room (OR) had
budgeted allocation bases of 4,000 nursing hours and 2,000 nursing hours, respectively.
The budgeted nursing overhead charges for each department for the month were
$168,000 and $132,000, respectively. The hospital floor for surgery patients had
budgeted overhead costs of $1,200,000 and 15,000 nursing hours for the month. For
patient Fred Adams, actual hours incurred were eight and four hours, respectively, in the
PRE-OP and OR rooms. He was in the hospital for 4 days (96 hours). Other costs
related to Adams were:
The hospital uses a budgeted overhead rate for applying overhead to patient stays.
Required:
What is the total cost of the stay of patient Fred Adams?
