1) Expenditures directly associated with the manufacture of finished goods that include
direct materials and direct labor are _____________________ costs.
2) What are the four steps in the effective management of variance analysis?
3) A company’s income before interest expense and income taxes in 2010 and 2011 is
$225,000 and $200,000, respectively. Its interest expense was $45,000 for both years.
Calculate the company’s times interest earned ratio, and comment on its level of risk.
4) What is a production budget?
5) A ____________________ is a signed promise to pay a specified amount of money
either on demand or at a definite future date.
6) What is inventory shrinkage? How do managers account for shrinkage?
7) Precision Brackets, Co. is considering switching from traditional allocation of
overhead based on direct labor hours to an activity-based costing system. The manager
has accumulated the following information on engineering changes for two of the
company’s major products:
Compute the cost per unit using:
(1) The traditional two-stage allocation of the costs of engineering changes based on
direct labor hours.
(2) The activity-based cost allocation of the costs of engineering changes.
8) A supplementary record created to maintain a separate account for each customer is
called the ______________________.