1) Job-costing systems separate costs into cost categories according to when costs are
introduced into the process of manufacture.
2) When large differences exist between practical capacity and master-budget capacity
utilization, several companies classify the difference as production-volume variance.
3) A customer cost hierarchy may include customer-sustaining costs.
4) Contribution margin equals revenue minus all fixed costs.
5) Whether the firm uses the market-based approach or the cost-based approach for
pricing decisions, the market forces must be considered.
6) If variable costs per unit increase, then the breakeven point will decrease.
7) Byproducts are recognized in the general ledger either at the time production is
completed or at the time of sale.
8) When a joint production process yields two or more products with high total sales
values, these products are called joint products.
9) Target pricing is a form of cost-based pricing.
10) When refining a costing system, a company should classify as many costs as
possible as indirect costs, thereby minimizing the extent to which costs have to be
traced rather than allocated.
11) Contribution margin and gross margin are terms that can be used interchangeably.
12) There are two elements that influence customer profitability – revenues and costs.
13) The contribution format is widely used for preparing external financial statements.
14) A responsibility center is a part, segment, or subunit of an organization, whose
manager is accountable for a specified set of activities.
15) Each of the following items pertains to one of these companies: Bedell Electronics
(a manufacturing company), Gregory Food Retailers (a merchandising company), and
Larson Real Estate (a service sector company). Classify each item as either
inventoriable (I) costs or period (P) costs.
inventoriable (I) costs or period (P) costs
a. Salary of Bedell Electronics president
b. Depreciation on Bedell Electronics assembly equipment
c. Salaries of Bedell’s assembly line workers
d. Purchase of frozen food for sale to customers by Gregory Food Retailers
e. Salaries of frozen food personnel at Gregory Food Retailing
f. Depreciation on freezers at Gregory Food Retailing
g. Salary of a receptionist at Larson Real Estate
h. Depreciation on a computer at Larson Real Estate
i. Salary of a real estate agent at Larson Real Estate
16) Hugo, owner of Automated Fabric, Inc., is interested in using the reciprocal
allocation method. The following data from operations were collected for analysis:
Which of the following linear equations represents the complete reciprocated cost of the
Personnel Department?
A) P = $300,000 – $160,000 (1,000/12,000) M
B) P = (1,000/12,000) M
C) P = $160,000 + (1,000/12,000) M
D) P = $160,000
17) Block Island TV currently sells large televisions for $360. It has costs of $280. A
competitor is bringing a new large television to market that will sell for $300.
Management believes it must lower the price to $300 to compete in the market for large
televisions. Marketing believes that the new price will cause sales to increase by 10%,
even with a new competitor in the market. Block Island TV sales are currently 100,000
televisions per year.
What is the target cost per unit if target operating income is 25% of sales?
A) $75
B) $90
C) $225
D) $270
18) Which of the following is true of management accounting information?
A) It focuses on documenting past business actions of a firm.
B) It is prepared based on SEC rules and FASB accounting principles.
C) It is prepared for shareholders.
D) It co-ordinates product design, production, and marketing decisions.
19) Which of the following is true of indirect costs?
A) Indirect costs are always considered sunk costs.
B) All indirect costs are included in cost of goods sold.
C) Indirect costs always vary in direct proportion to the level of production.
D) Indirect costs cannot be traced to a particular cost object in an economically feasible
way.
20) Buzz’s Educational Software Outlet sells two or more of the video games as a single
package. Managers are keenly interested in individual product-profitability figures.
Information pertaining to three bundled products and the stand-alone prices is as
follows:
Using the stand-alone method with manufacturing cost per unit as the weight for
revenue allocation, what amount will be allocated to the refrigerator?
A) $770.00
B) $672.50
C) $720.00
D) $750.00
21) One of the first steps to take when using CVP analysis to help make decisions is
________.
A) calculating the break-even point
B) identifying the variable and fixed costs
C) calculation of the degree of operating leverage for the company
D) estimating the volume of sales to make a good profit
22) The product strategy in which companies first determine the price at which they can
sell a new product and then design a product that can be produced at a low enough cost
to provide adequate operating income is referred to as ________.
A) cost-plus pricing
B) target costing
C) kaizen costing
D) full costing
23) Jupiter Corporation incurred fixed manufacturing costs of $16,000 during 2015.
Other information for 2015 includes:
The budgeted denominator level is 2,000 units.
Units produced total 2,200 units.
Units sold total 1,900 units.
Variable cost per unit is $4.
Beginning inventory is zero.
The fixed manufacturing cost rate is based on the budgeted denominator level.
The operating income using variable costing will be ________ as compared to the
operating income under absorption costing.
A) lower by $2,400
B) lower by $4,800
C) higher by $2,400
D) higher by $4,800
24) Which of the following classifications best describes the behavior of shipping
expense?
A) Mixed
B) Variable
C) Fixed
D) none of the above