Process-costing systems using standard costs record standard direct material costs in
Direct Materials Control and standard conversion costs in Conversion Costs Control.
Joint costs are the costs of a production process that yields multiple products
simultaneously.
In the “obtain information” stage of capital budgeting, a company gathers information
from all parts of the value chain to evaluate alternative projects.
COQ measures such as measures of customer satisfaction and employee satisfaction are
useful indicators of long-run performance.
Line management is directly responsible for attaining the goals of the organization.
Cost of Quality (COQ) reports provide more insight about quality improvements and
allow managers to compare trends over time.
Cost management not only helps reduce costs but also improve customer satisfaction
and the quality of a firm’s products.
To maximize profits, managers should produce more of the product with the greatest
contribution margin per unit of the constraining resource.
Value engineering entails improvements in product designs, and changes in materials
specifications.
One advantage of the total factor productivity is that operations managers can use it to
easily understand specific labor productivity issues.
When distribution costs are high, managers can use standard costing to analyze
variances for spending and efficiency variances.
Throughput costing results in a higher amount of manufacturing costs being placed in
inventory than either variable or absorption costing.
Because the variable costs are directly and causally linked to usage, charging them as a
function of the actual usage is appropriate.
Creating a little anxiety among managers and staff with challenging budgets helps
employee work harder to achieve goals.
If a managerial accountant suspected his or her immediate superior of unethical
behavior, who happens to be a chief executive officer or equivalent, the managerial
accountant should request an immediate meeting with the executive committee or the
audit committee.
Direct costs are allocated to the cost object using a cost-allocation method.
A decision table is a summary of the alternative actions, events, outcomes, and
probabilities of events.
The constant gross-margin percentage NRV method allocates joint costs to joint
products in such a way that the gross margin on each joint product is the same as it was
in the previous year.
Underestimating the degree of completion of ending work in process leads to increase
in operating income.
All products yielded from joint product processing have some positive value to the
firm.
To comply with antitrust laws, a company must not engage in predatory pricing,
dumping, or collusive pricing which lessen competition, put another company at a
competitive disadvantage, or harm consumers.
Cost accounting helps to aids managers in formulating strategies, setting prices for
products and services and making decisions about the mix of products and services to
be offered to customers.
If variance analysis is used for performance evaluation, managers are encouraged to
meet targets using creativity and resourcefulness.
When a joint production process yields one product with a high total sales value
compared to the total sales value of the other products of the process, that product is
called a joint product.
In nominal rate of return, the inflation element is the premium above the real rate.
All costs reported on the income statement of a service-sector company are
inventoriable costs.
Variances are used for evaluating performance and for motivating managers.
Management accounting has to strictly follow the rules of generally accepted
accounting principles for the purposes of measurement and reporting.
Direct material costs are the acquisition costs of all materials that eventually become
part of the cost object and cannot be traced to the cost object in an economically
feasible way.
There should be strict congruence between the performance evaluation of a subunit and
the performance evaluation of that subunit’s manager.
Measures which monitor critical performance variables that help managers track
progress toward achieving a company’s strategic goals are collectively called diagnostic
control systems.
Cost of goods sold budget is calculated as follows: beginning finished-goods inventory
+cost of goods manufactured – ending finished-goods inventory
Operating plans are generally expressed through long-run budgets.
The journal entry for transfer from Department B to finished goods is:
Debit: Work in Process—Department B
Credit: Finished Goods Control
The accounting entry to record the conversion cost of the Assembly Department is:
Work in Process-Assembly Department
Accounts Payable Control
Identifying and minimizing the sources of non-value-added manufacturing time
increases a firm’s responsiveness to its customers and reduces its costs.
Engineered costs contain a higher level of uncertainty than discretionary costs.
Timekeeper Corporation has two divisions, Distribution and Manufacturing. The
company’s primary product is high-end watches. Each division’s costs are provided
below:
Manufacturing: Variable costs per unit $2.45
Fixed costs per unit $9.04
Distribution: Variable costs per unit $0.60
Fixed costs per unit $1.20
The Distribution Division has been operating at a capacity of 4,010,000 units a week
and usually purchases 2,005,000 units from the Manufacturing Division and 2,005,000
units from other suppliers at $15.00 per unit.
What is the transfer price per watch from the Manufacturing Division to the
Distribution Division, assuming the method used to place a value on each transfer is
125% of full costs?
A) $11.49
B) $14.36
C) $15.00
D) $19.25
Innovative Metal Products Company manufactures pipes and applies manufacturing
costs to production at a budgeted indirect-cost rate of $12 per direct labor-hour. The
following data are obtained from the accounting records for June 2018:
Direct materials $400,000
Direct labor (16,000 hours @ $11/hour) $ 240,000
Indirect labor $ 25,000
Plant facility rent $ 100,000
Depreciation on plant machinery and equipment $ 42,000
Sales commissions $ 30,000
Administrative expenses $ 40,000
Required:
a. What actual amount of manufacturing overhead costs was incurred during June
2018?
b. What amount of manufacturing overhead was allocated to all jobs during June 2018?
c. For June 2018, was manufacturing overhead underallocated or overallocated?
Explain.
Which of the following is a reason why top managers want lower-level managers to
participate in the budgeting process?
A) To benefit from their experience with the day-to-day aspects of running the business.
B) To reduce the time and cost expended in the budgeting process.
C) To ensure that they do not introduce any budgetary slack.
D) To ensure that the budgets are administered rigidly given the changing market
conditions.
Which of the following correctly describes customer-response time?
A) the amount of time from when an order is ready to start on the production line to
when the product or service is delivered to the customer
B) the amount of time it takes to deliver a completed order to a customer
C) the amount of time from when a customer places an order for a product or requests a
service to when the product or service is delivered to the customer
D) the amount of time from when an order is ready to start on the production line to
when it becomes a finished good
Fine Lumber Inc. mills and finishes furniture kits. A certain kit requires the following:
During the third quarter, the company made 1,500 kits and used 3,150 square yards of
wood costing $42,600. Direct labor totaled 2,100 hours for $46,150.
Required:
a. Compute the direct materials price and efficiency variances for the quarter.
b. Compute the direct manufacturing labor price and efficiency variances for the quarter.
Jupiter Corporation incurred fixed manufacturing costs of $18,000 during 2017. Other
information for 2017 includes:
The budgeted denominator level is 2,400 units.
Units produced total 2,700 units.
Units sold total 1,600 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. (Round any intermediary calculations to the
nearest cent and your final answer to the nearest dollar.)
A) lower by $8,250.00
B) lower by $2,250.00
C) higher by $8,250.00
D) higher by $2,250.00
Revenue allocation is used when ________.
A) revenues cannot be estimated but can be traced to specific cost objects
B) revenues are related to a particular revenue object but cannot be traced to it in an
economically feasible way
C) revenues are not related to a particular object but can be traced to that object in an
economically feasible way
D) revenue optimization is the goal
The Green Company processes unprocessed goat milk up to the split-off point where
two products, condensed goat milk and skim goat milk result. The following
information was collected for the month of October:
The costs of purchasing the of unprocessed goat milk and processing it up to the split-off
point to yield a total of 100,500 gallons of saleable product was $191,480. There were no
inventory balances of either product. Condensed goat milk may be processed further to
yield 42,000 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an
additional processing cost of $6 per usable gallon. Xyla can be sold for $21 per gallon.
Skim goat milk can be processed further to yield 56,700 gallons of skim goat ice cream,
for an additional processing cost per usable gallon of $6. The product can be sold for $14
per gallon.
There are no beginning and ending inventory balances.
What is the estimated net realizable value of Xyla at the split-off point?
A) $453,600
B) $464,000
C) $630,000
D) $637,500
Which of the following is false regarding net realizable value (NRV)?
A) it is better to use a product’s market value at the split-off point than its estimated
NRV
B) the estimated NRV at the split-off point is calculated by taking the sales value after
further processing and deducting additional processing costs
C) NRV is the estimated selling price after processing the product beyond the split-off
point.
D) the constant NRV method uses an identical gross-margin percentage for each
product to allocate joint costs
R&D, production, and customer service are business functions that are all included as
part of ________.
A) the value chain
B) benchmarking
C) customer relationship management
D) the supply chain
Each of the following are true of relevant information except:
A) Past costs are helpful when making predictions but not relevant when making
decisions
B) Different alternatives can be compared by examining differences in expected future
revenues and expected total future costs
C) significant past investment amounts are relevant to decision making
D) Not all future revenues and expenses are relevant
The following information is for High Corp:
If targeted operating income is $50,000, then targeted sales revenue is ________. (Round
the final answer to the nearest dollar.)
A) $540,000
B) $390,000
C) $150,000
D) $180,000
A purchasing manager’s performance is best evaluated using information such as
A) usage efficiency and direct materials price variance
B) direct materials flexible-budget variance
C) direct manufacturing labor flexible-budget variance
D) price and terms bargaining effectiveness, achievement of quality goals, and direct
materials price variance
What role does a trade-in allowance on old equipment play in a decision to retain or
replace equipment?
A) It is relevant since it increases the cost of the new equipment.
B) It is irrelevant since it reduces the cost of the old equipment.
C) It is irrelevant to the decision since it does not impact the cost of the new equipment.
D) It is relevant since it reduces the cost of the new equipment.
Allocating indirect costs to departments based on the relative revenue earned by those
departments is done based on which of the following criterion?
A) direct hours utilized
B) benefits received
C) material resources used
D) cause-and-effect relationships
Standard material cost per kg of raw material is $6.50. Standard material allowed per
unit is 5 Kg. Actual material used per unit is 6.00 Kg. Actual cost per kg is $6.00. What
is the standard cost per output unit?
A) $30.00
B) $36.00
C) $32.50
D) $39.00
Ventaz Corp manufactures small windows for back yard sheds. Historically, its demand
has ranged from 30 to 50 windows per day with an average of 41. Alex is one of the
production workers and he works eight hours a day, five days a week. Each order is one
window and each window takes 10 minutes.
What is the cycle time for an order?
A) 10 minutes per window
B) 100.00 minutes per window
C) 39.29 minutes per window
D) 500.00 minutes per window
The following information applies to Krynton Corp. which supplies microscopes to
laboratories throughout the country. Krynton purchases the microscopes from a
manufacturer which has a reputation for very high quality in its manufacturing
operation.
Assuming each order was made at the economic order quantity amount, what is the cost of
placing an order?
A) $850 per order
B) $153 per order
C) $144 per order
D) $900 per order
Genent Industries, Inc. (GII), developed standard costs for direct material and direct
labor. In 2017, GII estimated the following standard costs for one of their major
products, the 30-gallon heavy-duty plastic container.
During July, GII produced and sold 4,000 containers using 1,700 pounds of direct
materials at an average cost per pound of $15 and 3,225 direct manufacturing labor hours
at an average wage of $15.25 per hour.
The direct material price variance during July is ________.
A) $20,000 unfavorable
B) $8,500 favorable
C) $8,500 unfavorable
D) $2,000 unfavorable
Harold’s Picture manufactures various picture frames. Each new employee takes 6
hours to make the first picture frame and 4.8 hours to make the second. The
manufacturing overhead charge per hour is $25.
Required:
a. What is the learning-curve percentage, assuming the cumulative average method?
b. What is the time needed to build 8 picture frames by a new employee using the
cumulative average-time method? You may use an index of −0.1520.
c. What is the time needed to produce the 16th frame by a new employee using the
incremental unit-time method? You may use an index of −0.3219.
d. How much manufacturing overhead would be charged to the 16 picture frames using
the average-time approach?
Classic Products Company manufactures colonial style desks. Some of the company’s
data was misplaced. Use the following information to replace the lost data:
What are the actual variable costs (C)?
A) $71,220
B) $72,920
C) $72,070
D) $82,470
First Class, Inc., expects to sell 28,000 pool cues for $14 each. Direct materials costs
are $3, direct manufacturing labor is $5, and manufacturing overhead is $0.82 per pool
cue. The following inventory levels apply to 2019:
How many pool cues need to be produced in 2019?
A) 30,800 cues
B) 29,300 cues
C) 29,500 cues
D) 26,500 cues
Financial planning models:
A) are primarily used to evaluate the differences between actual and planned volume
B) are not part of sensitivity analysis
C) are mathematical representations of the relationships among factors such as
operating and financing activities that affect the budget
D) allow for analysis of changes in predicted data but not the other underlying
assumptions of the budget
Which of the following would make life-cycle budgeting particularly important to
implement?
A) a very short R&D period with minimal costs but with an emphasis on speed to
market
B) a product that will be brought to market very quickly and will only be offered for a
limited time
C) the development period for a product is long and that the R&D needed and the
design activities are costly
D) a service that will be offered once this year and then eliminated as a result of a
proposed sale of a division
Which of the following is an advantage of internal rate of return method?
A) Sum of IRRs of individual projects gives an IRR of a combination or portfolio of
projects.
B) The percentage returns computed under the IRR method are easy to understand and
compare.
C) It can be expressed as a unique number.
D) It can be used when the required rate of return varies over the life of a project.
Ralph Johnson is paid $30 an hour for straight-time and $40 an hour for overtime. One
week he worked 39 hours, which included 9 hours of overtime, and 4 hours of idle time
caused by material shortages. What is the direct labor cost incurred to the company?
A) $1,050
B) $1,260
C) $1,140
D) $1,100
Product-sustaining costs in activity-based costing are similar to ________.
A) mixed costs
B) variable costs
C) semi-variable costs
D) fixed costs
Foley Products Company makes a household appliance with model number X500. The
goal for 2018 is to reduce direct materials usage per unit. No defective units are
currently produced. Manufacturing conversion costs depend on production capacity
defined in terms of X500 units that can be produced. The industry market size for
appliances increased 10% from 2017 to 2018. The following additional data are
available for 2017 and 2018:
What is operating income for 2017?
A) $1,530,000
B) $2,240,000
C) $1,890,000
D) $1,880,000
Samuels Company is considering pricing its 10,000-gallon petroleum tanks using either
variable manufacturing or full product costs as the base. The variable cost base provides
a prospective price of $6,000 and the full cost base provides a prospective price of
$6,100. Which of the following explains the difference in the two prices?
A) the estimated amount of profit
B) the variable cost base estimates fixed costs in the markup percentage while the full
cost base includes an amount for fixed costs
C) there is no explanation since this is known as price discrimination
D) the difference is caused by the inability to estimate fixed cost per unit with any
degree of reliability
Which of the following is the formula for the sales-quantity variance?
A) deducting budgeted contribution margin based on actual units at actual mix from
budgeted contribution margin based on actual units sold at the actual mix
B) deducting budgeted contribution margin based on actual units at actual mix from
budgeted contribution margin based on actual units sold at the budgeted mix
C) deducting budgeted contribution margin based on budgeted units at actual mix from
budgeted contribution margin based on actual units sold at the budgeted mix
D) deducting budgeted contribution margin based on budgeted units at budgeted mix
from budgeted contribution margin based on actual units sold at the budgeted mix
Which of the following cost is included in cost of goods sold?
A) customer service cost
B) manufacturing labor cost
C) distribution cost
D) marketing cost
The use of theoretical capacity results in an unrealistically low fixed manufacturing cost
per unit because it is based on ________.
A) real available capacity
B) an unattainable and idealistic level of capacity
C) normal capacity utilization
D) normal costing
If a sales-volume variance was caused by poor-quality products, then the ________
would be in the best position to explain the variance.
A) production manager
B) sales supervisor
C) financial supervisor
D) logistic manager
What are the advantages of costing rework?
Explain the difference between a joint product and a byproduct. Can a byproduct ever
become a joint product? Also, can a joint product ever become a byproduct?
How does inspecting at various stages of completion affect the amount of normal and
abnormal spoilage?
What are the strengths and weaknesses of the accrual accounting rate-of-return (AARR)
method for evaluating long-term projects?
What are distress prices and which transfer prices should be used for judging
performance if distress prices prevail?
What are the direct costs of a job and in which source documents are they recorded?
Executive compensation plans are based on both financial and nonfinancial
performance measures. Discuss
In order, list the five steps in the decision-making process.
Under what conditions might a manufacturing firm sell a product for less than its
long-term price? Why?
Wilson’s Language School manufactures CDs and DVDs to teach English as a Second
Language. Wilson has just prepared a Cost of Quality Report, and the staff has noticed a
decline in prevention costs as a percentage of total sales over a three-year period. What
changes might Wilson expect to see in appraisal costs as a percentage of sales, internal
failure costs as a percentage of sales, and external failure costs as a percentage of sales
given this trend?
What are the relevant cash inflows and outflows for capital budgeting decisions?
There is uncertainty in defense contracts about the final cost to produce a new weapon
or equipment. Explain.
What are the two methods to account for byproducts. Which is the more appropriate
method to use and why?
Explain the term cost leadership. What are the possible ways through which a company
would try to become a cost leader? How far is it desirable to implement cost reduction
measures?
Under the benefits-received criterion, the physical-measure method is much less
desirable than the sales value at split-off method. Why?
