A 15% change in sales will result in a 15% change in net income.
a. True
b. False
Answer:
If the under applied factory overhead amount is immaterial, it is transferred to Cost of
Goods Sold at the end of the fiscal year.
a. True
b. False
Answer:
Detailed supplemental schedules based on department responsibility are often prepared
for major items in the operating expenses budget.
a. True
b. False
Answer:
Which of the following is an example of direct materials cost for an automobile
manufacturer?
a. cost of oil lubricants for factory machinery
b. cost of wages of assembly worker
c. salary of production supervisor
d. cost of interior upholstery
Answer:
The fact that workers are unable to meet a properly determined direct labor standard is
sufficient cause to change the standard.
a. True
b. False
Answer:
For an accounting period during which the quantity of inventory at the end was smaller
than the quantity at the beginning, income from operations reported under variable
costing will be larger than income from operations reported under absorption costing.
a. True
b. False
Answer:
A service organization will not use the job order costing method because it has no direct
materials.
a. True
b. False
Answer:
manufacturing philosophy emphasizes quality and zero defects.
a. Traditional
b. Lean
c. Zero-Based
d. Chinese
Answer:
The sales budget is the starting point for preparation of the direct labor cost budget.
a. True
b. False
Answer:
The following data are taken from the financial statements:
(a) Assuming that credit terms on all sales are n/45, determine for each year (1) the
accounts receivable turnover and (2) the number of days’ sales in receivables.
Round intermediate calculations to whole numbers and final answers to two decimal
places.
(b) Comment on any significant trends revealed by the data.
Answer:
The Bonnington Company manufactures small lamps and desk lamps. The following
shows the activities per product:
Using the following information prepared by the Bonnington Company, determine the
total factory overhead to be charged to small lamps.
a. $314,000
b. $209,333
c. $202,000
d. $104,000
Answer:
Job cost sheets can provide information to managers for all except
a. the cost impact of materials changes
b. the cost impact of continuous improvement in the manufacturing process
c. the cost impact of materials price or direct labor rate changes over time
d. utilities, managerial salaries, and depreciation of computers in the corporate office
Answer:
Which of the following is characteristic of the lean system?
a. Fewer work in process account transactions.
b. Work in process and raw materials accounts combined.
c. Elimination of the direct labor account.
d. All of the above.
Answer:
Testing
Identity the following by their type of quality cost.
a. Preventive costs
b. Appraisal costs
c. Internal failure costs
d. External failure costs
Answer:
The rate earned on total assets measures the profitability of total assets, without
considering how the assets are financed.
a. True
b. False
Answer:
The point where the sales line and the total costs line intersect on the cost-volume-profit
chart represents
a. the maximum possible operating loss
b. the maximum possible operating income
c. the total fixed costs
d. the break-even point
Answer:
Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000
units of Y. Related data are:
What was Rusty Co.’s unit variable cost of E?
a. $52.50
b. $70.00
c. $120.00
d. $50.00
Answer:
Schedule of Activity Costs
From the above schedule of activity costs, determine the external failure costs.
a. $39,000
b. $19,000
c. $12,000
d. $31,000
Answer:
A change in the amount of sales can be due to either a change in the units sold or a
change in price or both.
a. True
b. False
Answer:
What cost concept used in applying the cost-plus approach to product pricing includes
only desired profit in the markup?
a. product cost concept
b. variable cost concept
c. sunk cost concept
d. total cost concept
Answer:
Depreciation expense’”factory
Match the items below for a bakery to the type of cost (a-d).
a. Direct materials
b. Direct labor
c. Factory overhead
d. Non-manufacturing cost
Answer:
Job order cost systems can be used to compare unit costs of similar jobs to determine if
costs are staying within expected ranges.
a. True
b. False
Answer:
If two companies have the same current ratio, their ability to pay short-term debt is the
same.
a. True
b. False
Answer:
Flexible budgeting requires all levels of management to start from zero and estimate
sales, production, and other operating data as though operations were being started for
the first time.
a. True
b. False
Answer:
Prime costs are the combination of direct materials and direct labor costs.
a. True
b. False
Answer:
Crain Company budgeted 35,000 direct labor hours and incurred 40,000 direct labor
hours. It incurred $780,000 of overhead and estimated overhead was $735,000.
What is Crain’s predetermined overhead rate? Was overhead over applied or under
applied for the year? By how much?
Answer:
Why would you compare or not compare Coca-Cola and Pepsi-Cola (PepsiCo) as
companies to each other?
Answer:
Purple Co.’s production budget for Product X for the year ended December 31 is as
follows:
In Purple’s production operations, Materials A, B, and C are required to make Product
X. The quantities of direct materials expected to be used for each unit of product are as
follows:
Product X
Material A 0.50 pound per unit
Material B 1.00 pound per unit
Material C 1.20 pound per unit
The prices of direct materials are as follows:
Material A $0.60 per pound
Material B $1.70 per pound
Material C $1.00 per pound
Prepare a direct materials purchases budget for Product X, assuming that there are no
beginning or ending inventories for direct materials (all units purchased are used in
production).
Answer:
Evaluation of how income will change based on an alternative course of action
Match the definitions that follow with the term (a’“e) it defines.
u. Opportunity cost
v. Sunk cost
w. Theory of constraints
x. Differential analysis
y. Product cost distortion
Answer:
The following are inputs and outputs to the help desk:
operator training
number of calls per day
maintenance of computer equipment
number of operators
number of complaints
Identify whether each is an input or an output to the help desk.
Answer:
Describe at least five benefits of budgeting.
Answer:
A company reports the following:
Calculate the company’s earnings per share on common stock.
Answer: