1) Costs of activities related to a group of units sold to a customer is termed as customer
batch-level costs.
2) The revenues budget should be based on the cost of goods sold budget.
3) In some variations of normal costing, organizations use budgeted rates to assign
direct costs as well as indirect costs to jobs.
4) The high-low method relies on only two observations, the highest and lowest, to
estimate a linear cost function.
5) The best-designed strategies and the best-developed capabilities are useless unless
they are effectively executed.
6) One of the most common problems reported by companies using variable costing is
the difficulty of classifying costs into fixed or variable categories.
7) Two common operational measures of time are customer-response time and on-time
performance.
8) The supply chain refers to the sequence of business functions in which customer
usefulness is added to products or services.
9) At the start of the budget period, management will have made most decisions
regarding the level of fixed overhead costs to be incurred.
10) A budget is a benchmark against which actual performance can be compared.
11) Oil refining companies primarily use job costing to estimate costs.
12) A cost that differs from one month to another is known as a differential cost.
13) Life-cycle budgeting ________.
A) has little in common with target pricing.
B) is most useful to companies that manufacture small items such as household plastics.
C) helps companies estimate revenues over a multiyear horizon.
D) gives companies more insight into total costs when manufacturing costs consume
the majority of the resources.
14) Animent Industries, Inc. (AII), developed standard costs for direct material and
direct labor. In 2015, AII estimated the following standard costs for one of their major
products, the 10-gallon plastic container.
During June, AII produced and sold 20,000 containers using 1,900 pounds of direct
materials at an average cost per pound of $64 and 1,000 direct manufacturing
labor-hours at an average wage of $30.50 per hour.
The direct manufacturing labor efficiency variance during June is ________.
A) $125 unfavorable
B) $500 favorable
C) $1,600 unfavorable
D) $0
15) Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product
profitability is analyzed as follows:
Under the revised ABC system, total overhead costs allocated to Sweatshirts will be
________.
A) $ 48,720
B) $ 76,720
C) $224,920
D) None of these answers are correct.
16) At the Auric Company, the cost of the personnel department has always been
charged to production departments based upon number of employees. Recently,
opinions gathered from the department managers indicate that the number of new hires
might be a better predictor of personnel costs.
Total personnel department costs are $287,500.
Which cost estimation method is being used by Auric Company?
A) the simple regression method
B) the conference method
C) the account analysis method
D) the marginal costing method
17) Within the relevant range:
A) variable cost per unit decreases as production decreases.
B) fixed cost per unit increases as production decreases.
C) fixed cost per unit decreases as production decreases.
D) variable cost per unit increases as production decreases.
18) Which of the following is an example of an extrinsic reward?
A) receiving a high rating on customer service
B) appreciation mail from a customer
C) promotions based on performance
D) verbal appreciation from CEO
19) ________ sector companies purchase materials and components and convert them
into finished goods.
A) Merchandising
B) Service
C) Manufacturing
D) Professional
20) Which of the following costs is a relevant inventory stockout cost under EOQ
decision model?
A) The costs of obsolescence and costs of insurance that change with the quantity of
inventory held.
B) The return forgone by investing capital in inventory rather than elsewhere.
C) The lost contribution margin on sales forgone as a result of customer dissatisfaction
due to unavailability of goods.
D) The costs of storage space owned that cannot be used for other profitable purposes
when inventories decrease.
21) Munoz, Inc., produces a special line of plastic toy racing cars. Munoz, Inc.,
produces the cars in batches. To manufacture a batch of the cars, Munoz, Inc., must set
up the machines and molds. 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 molds for different styles of car.
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 fixed setup overhead costs.
A) $3,200 unfavorable
B) $2,025 unfavorable
C) $3,600 unfavorable
D) $2,025 favorable
22) Which of the following projects is rejected on the basis of net present value
method?
A) Project A with an NPV of $5,000
B) Project B with an NPV of $(7,000)
C) Project C with an NPV of $15,000
D) Project D with an NPV of $500
23) If a company has a degree of operating leverage of 3.0 and sales increase by 25%,
then ________.
A) total fixed costs will increase by 75%
B) total costs will increase by 75%
C) profit will increase by 30%
D) profit will increase by 75%
24) The breakeven point revenues is calculated by dividing ________.
A) fixed costs by total revenues
B) fixed costs by contribution margin percentage
C) total revenues by fixed costs
D) contribution margin percentage by fixed costs
25) The reporting and assessment of revenues earned from customers and the costs
incurred to earn those revenues is ________.
A) creditor-age analysis
B) customer-profitability analysis
C) debtor-cost analysis
D) customer-turnover analysis
26) Which of the following statements is true of fixed overhead cost variances?
A) The difference between actual costs and flexible budget costs will give the
production volume variance.
B) The difference between actual costs and static budget costs will give the production
volume variance.
C) The difference between flexible budget costs and allocated overhead costs will give
the production volume variance.
D) The difference between static budget costs and flexible budget costs will give the
production volume variance.
27) Comfort chair company manufacturers a standard recliner. During February, the
firm’s Assembly Department started production of 73,000 chairs. During the month, the
firm completed 78,000 chairs, and transferred them to the Finishing Department. The
firm ended the month with 10,000 chairs in ending inventory. There were 15,000 chairs
in beginning inventory. All direct materials costs are added at the beginning of the
production cycle and conversion costs are added uniformly throughout the production
process. The FIFO method of process costing is used by Comfort. Beginning work in
process was 30% complete as to conversion costs, while ending work in process was
80% complete as to conversion costs.
How many of the units that were started and completed during February?
A) 83,000
B) 78,000
C) 73,000
D) 63,000
28) Domose Inc. planned to use $150 of material per unit but actually used $147 of
material per unit, and planned to make 1,100 units but actually made 900 units.
The sales-volume variance for materials is ________.
A) $2,700 favorable
B) $29,400 unfavorable
C) $30,000 unfavorable
D) $2,700 unfavorable
29) The manufacturing cycle including related delays can be reduced by ________.
A) batching similar jobs together for processing
B) decreasing the capacity of a bottleneck resource
C) not setting up flexible manufacturing systems
D) increasing the time for setups and processing
30) Which of the following statements is true of productivity factors?
A) Partial-productivity focus on a multiple inputs simultaneously.
B) Total factor productivity (TFP) focus on a single input.
C) It is the ratio of the quantity of output produced to the costs of all inputs used based
on current prices.
D) Comparable data for total factor productivity measurements are easily available.
31) The Golden Shades Corporation disposes a capital asset with an original cost of
$280,000 and accumulated depreciation of $160,000 for a salvage price of $50,000.
Silver Shades’s tax rate is 40%. Calculate the after-tax cash inflow from the disposal of
the capital asset.
A) $28,000
B) $70,000
C) $50,000
D) $78,000
32) Processing orders and shipping products or providing services to customers is
known as ________.
A) after-sales services
B) distribution
C) marketing
D) supply chain
33) What are five features of a just-in-time manufacturing system?
34) A number of costs and measures of activity are listed below.
Required:
For each item above, indicate whether the cost is MAINLY fixed or variable with
respect to the possible measure of activity listed next to it.
35) Briefly explain why many companies use absorption costing for external reporting
as well as internal accounting.
36) Acme Janitor Service has always taken pride in the fact that it had one of the
highest customer response times in the home cleaning service industry. However, as the
products manufactured for this industry have become more complex, the company’s
customer response time has declined.
Required:
Why do you think that response time declined if all other quality factors have remained
the same?
37) An analysis of Terbolt Corporation’s operating income changes between 2015 and
2016 show the following:
Operating income for 2015$4,750,000
Add growth component75,000
Add price-recovery component398,000
Deduct productivity component(50,000)
Operating income for 2016$5,173,000
Required:
Is Terbolt’s operating income gain consistent with the product differentiation or cost
leadership strategy? Explain briefly.
38) The quality system, which provides information about yields, defective products,
and
late deliveries to customers.
The informal management control system includes the shared values, loyalties, and
mutual commitments among members of the organization, the company’s culture, and
the unwritten norms about acceptable behavior for managers and other employees.
39) What areas of responsibility does a chief financial officer have in a typical
organization?
40) Pet Products Company uses an automated process to manufacture its pet replica
products. For June, the company had the following activities:
Direct materials are placed into production at the beginning of the process and
conversion costs are incurred evenly throughout the process.
Required:
Prepare a production cost worksheet using the FIFO method.
41) Briefly describe the conditions that should be met for market-based transfer pricing
to lead to optimal decision making among subunits of a large organization.
42) Explain how using master-budget capacity utilization for setting prices can lead to a
downward demand spiral.