1) With the use of a bar chart, the number of “unprofitable” customers and the
magnitude of their losses are apparent.
2) Direct manufacturing labor includes plant rent and salaries paid to plant supervisors.
3) The last step in the decision-making process is to make decisions by choosing among
alternatives.
4) Conformance quality is the performance of a product or service relative to its design
and product specifications.
5) The account analysis method estimates cost functions by classifying various cost
accounts as variable, fixed, or mixed with respect to the identified level of activity.
6) Value engineering seeks to reduce value-added costs as well as nonvalue-added
costs.
7) Classification of main products, joint products, and byproducts can always be done
with ease.
8) Transferred-in costs are costs incurred in previous departments that are carried
forward as the product’s cost when it moves to a subsequent process in the production
cycle.
9) Goldfarb’s Book and Music Store has two service departments, Warehouse and Data
Center. Warehouse Department costs of $350,000 are allocated on the basis of budgeted
warehouse-hours. Data Center Department costs of $150,000 are allocated based on the
number of computer log-on hours. The costs of operating departments Music and Books
are $250,000 and $300,000, respectively. Data on budgeted warehouse-hours and
number of computer log-on hours are as follows:
Using the step-down method, what amount of Warehouse Department cost will be
allocated to Department Music if the service department with the highest percentage of
interdepartmental support service is allocated first? (Round up)
A) $233,333
B) $116,667
C) $243,333
D) $121,667
10) ________ categorizes costs related to customers into different cost pools on the
basis of either different classes of cost drivers or different degrees of difficulty in
determining the cause-and-effect (or benefits-received) relationships.
A) Customer-profitability analysis
B) Customer revenues
C) Customer cost hierarchy
D) Price discounting
11) Which of the following statements is true of joint costing?
A) The costs of a production process that yields multiple products simultaneously are
called joint costs.
B) Distribution costs incurred beyond the splitoff point that are assignable to each of the
specific products identified at the splitoff point are considered as joint costs.
C) The primary purpose of joint costing is to allocate the separable costs to the
individual products that are eventually sold.
D) Joint costing is less useful for companies which manufacture multiple products
simultaneously from the same production process.
12) Southwestern College is planning to hold a fund raising banquet at one of the local
country clubs. It has two options for the banquet:
OPTION one:Crestview Country Club
a. Fixed rental cost of $1,000
b. $12 per person for food
OPTION two:Tallgrass Country Club
a. Fixed rental cost of $3,000
b. A caterer who charges $8.00 per person for food
Southwestern College has budgeted $1,800 for administrative and marketing expenses.
It plans to hire a band which will cost another $800. Tickets are expected to be $30 per
person. Local business supporters will donate any other items required for the event.
Which option provides the least amount of risk?
A) Option one
B) Option two
C) Both options provide the same amount of risk.
D) Option one is risk-free
13) Woodruff Flowering Plants provides the following information for the month of
May:
ActualBudget
What is the budgeted contribution margin per composite unit for the actual mix?
A) $19.00
B) $20.30
C) $19.40
D) $20.00
14) Effective planning of variable overhead costs means that a company performs those
variable overhead costs that primarily ________.
A) increase the planned variable overhead budgets
B) add value for the customer using the products or services
C) increase the linearity between total costs and volume of production
D) identify the product advertising requirements
15) Emerging Dock Company manufactures boat docks on an assembly line. Its
standard costing system uses two cost categories, direct materials and conversion costs.
Each product must pass through the Assembly Department and the Finishing
Department. Direct materials are added at the beginning of the production process.
Conversion costs are allocated evenly throughout production.
Which of the following journal entries records the standard costs of direct materials
assigned to units worked on and total direct materials variances assuming that the
Assembly Department used 10% less materials than expected?
A) Work in Process Assembly 320,000
Assembly Department Materials Cost Control 320,000
B) Work in Process Assembly 320,000
Direct Materials Variance 32,000
Assembly Department Materials Cost Control 288,000
C) Work in Process Assembly 32,000
Assembly Department Materials Cost Control 32,000
D) Work in Process Assembly 288,000
Direct Materials Variances 32,000
Assembly Department Materials Cost Control 320,000
16) Which of the following is the fundamental purpose of responsibility accounting?
A) to penalize managers for inefficiency
B) to gather information that will enable future improvement
C) to create an efficient and centralized organization
D) to evaluate the performance of managers
17) Werner Brothers, Inc., used the high-low method to derive its cost formula for
electrical power cost. According to the cost formula, the variable cost per unit of
activity is $2 per machine-hour. Total electrical power cost at the high level of activity
was $9,400 and at the low level of activity was $9,000. If the high level of activity was
2,200 machine hours, then the low level of activity was:
A) 1,800 machine hours
B) 1,900 machine hours
C) 2,000 machine hours
D) 1,700 machine hours
18) Capity Tea Products has an exclusive contract with British Distributors. Calamine
and Capity are two brands of teas that are imported and sold to retail outlets. The
following information is provided for the month of March:
Budgeted and actual fixed corporate-sustaining costs are $1,850 and $2,300,
respectively.
For the contribution margin, what is the total static-budget variance?
A) $220 favorable
B) $330 unfavorable
C) $1,000 favorable
D) $550 favorable
19) Gloria’s Decorating produces and sells a mantel clock for $100 per unit. In 2015,
42,125 clocks were produced and 37,958 were sold. Other information for the year
includes:
What is the inventoriable cost per unit using variable costing?
A) $45.00
B) $52.50
C) $65.00
D) $115.00
20) Which of the following true of nonfinancial measures of quality?
A) They direct attention to financial processes that help managers identify the precise
problem areas that need improvement.
B) They focus managers’ attention on how poor quality affects operating income.
C) They assist in problem solving by comparing costs and benefits of different
quality-improvement programs and by setting priorities for cost reduction.
D) They provide immediate short-run feedback on whether quality-improvement efforts
are succeeding.
21) If total rent expense of $180,000 is allocated on the basis of square footage, the
amount allocated to the Small Department would be ________.
A) $50,525
B) $50,625
C) $50,725
D) $50,825
22) A tool which indicates how frequently each type of defect occurs is a ________.
A) control chart
B) Pareto diagram
C) scatter diagram
D) fishbone diagram
23) An understanding of life-cycle costs can lead to ________.
A) additional costs during the manufacturing cycle
B) less need for evaluation of the competition
C) cost effective product designs that are easier to service
D) mutually beneficial relationships between buyers and sellers
24) The products of a joint production process that have low total sales values
compared with the total sales value of the main product are called ________.
A) primary products
B) joint products
C) byproducts
D) waste products
25) Product testing is an example of ________.
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs
26) Which of the following is true of cost-volume-profit analysis?
A) The theory assumes that all costs are variable.
B) The theory assumes that units manufactured equal units sold.
C) The theory states that total variable costs remain the same over a relevant range.
D) The theory states that total costs remain the same over the relevant range.
27) Assuming Comco uses the high-low method of analysis, if machine hours are
budgeted to be 20,000 hours then the budgeted total maintenance cost would be
expected to be:
A) $25,400
B) $25,560
C) $23,700
D) $24,720