1) Benchmarking measures how well a company and its managers are doing in
comparison to other organizations.
2) A Pareto diagram is usually in a bar-chart format, that indicates how frequently each
type of defect occurs, ordered from the most frequent to the least frequent.
3) In an EVA calculation, the corporate charge for a division’s investment is based on a
weighted average of the after-tax interest rate on the firm’s debt and the cost of the
firm’s equity.
4) The planning of fixed overhead costs differs from the planning of variable overhead
costs in terms of timing.
5) Generally a coefficient of determination (r2) of 0.30 or higher passes a goodness of
fit test.
6) The salary component of compensation dominates when performance measures that
are sensitive to managers’ actions are not available.
7) Fixed manufacturing costs included in cost of goods available for sale + the
production-volume variance will always = total fixed manufacturing costs under
absorption costing.
8) An Indian company selling a product in the United States at a price below the market
value of the product in India is an example of collusive pricing.
9) To reduce the undesirable incentives to build up inventories that absorption costing
can
create, a number of companies use variable costing for internal reporting.
10) An accelerated need for refined cost systems is due to ________.
A) global monopolies
B) rising prices
C) intense competition
D) a shift toward increased direct costs
11) Teecorp Company provides the following ABC costing information:
The above activities used by their three departments are:
How much of invoice cost will be assigned to the Bush Department?
A) $6,400
B) $8,000
C) $25,600
D) $40,000
12) Which of the following statements is true about the factors that affect pricing
decisions?
A) Information about competitors’ technologies is not useful for pricing decisions.
B) Information about a competitor in a perfect market affects pricing decisions.
C) Increase in price of a substitute product does not affect pricing decisions.
D) Fluctuations in exchange rates between different countries’ currencies affect pricing
decisions.
13) Which of the following companies is most likely to use an operation-costing
system?
A) a company involved in manufacture of ball bearing on a large scale
B) a company that has been awarded a contract to construct a bridge for the government
C) a company that makes suits for which the basic design is same, but depending on
specifications, each batch of suits varies somewhat from other batches
D) a furniture making company which makes furnitures as per the specifications of the
customers
14) Assembly department of Zahra Technologies had 100 units as work in process at the
beginning of the month. These units were 50% complete. It has 200 units which are
25% complete at the end of the month. During the month, it completed and transferred
500 units. Direct materials are added at the beginning of production. Conversion costs
are allocated evenly throughout production. Zahra uses weighted-average
process-costing method.
What is the total equivalent units in ending inventory for assignment of direct materials
cost?
A) 25 units
B) 50 units
C) 150 units
D) 200 units
15) Responsibility accounting ________.
A) emphasizes controllability
B) focuses on who should be asked about the information
C) attempts to assign blame for problems to a specific manager
D) attempts to create a decentralized organization
16) A data warehouse or infobarn ________.
A) is reserved for exclusive use by the CFO
B) is primarily used for financial reporting purposes
C) stores information used by different managers for multiple purposes
D) gathers only nonfinancial information
17) Which of the following is a limitation of using past performance as a basis for
judging actual results?
A) It does not account for productivity increases over the periods.
B) It increases the incentive for managers to introduce budgetary slack.
C) It does consider inefficiencies of previous periods.
D) It increases the tendency of senior managers exaggerating changes in future
conditions as opposed to changes in current conditions.
18) 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 direct method, what amount of Data Center Department costs will be
allocated to Department Music?
A) $150,000
B) $66,667
C) $83,333
D) $60,000
19) The cost function y = 2,000 + 6X ________.
A) has a slope coefficient of 2,000
B) has an intercept of 6
C) is a straight line
D) represents a fixed cost
20) Discretionary fixed costs:
A) have a planning horizon that covers many years.
B) may be reduced for short periods of time with minimal damage to the long-run goals
of the organization.
C) cannot be reduced for even short periods of time without making fundamental
changes.
D) are most effectively controlled through the effective utilization of facilities and
organization.
21) A negative consequence of recording byproducts in the accounting records when the
sale occurs is that ________.
A) the revenue from the byproducts is usually fairly large and the accounting records
will be distorted
B) earnings cannot be timed under this method
C) managers can be tempted to stockpile byproducts
D) it involves complex calculations compared to the production method
22) Following a strategy of product differentiation, Arseniq Company makes a high-end
Appliance, XT15. Arseniq presents the following data for the years 2014 and 2015:
Arseniq produces no defective units but it wants to reduce direct materials usage per
unit of XT15. Manufacturing conversion costs in each year depend on production
capacity defined in terms of XT15 units that can be produced. Selling and
customer-service costs depend on the number of customers that the customer and
service functions are designed to support. Arseniq had 140 customers in 2014 and 145
customers in 2015.
What is the cost effect of the growth component?
A) $375,000 U
B) $1,506,250 U
C) $1,506,250 O
D) $375,000 O
23) Velshi Printers has contracts to complete weekly supplements required by forty-six
customers. For the year 2015, manufacturing overhead cost estimates total $840,000 for
an annual production capacity of 12 million pages.
For 2015 Velshi Printers has decided to evaluate the use of additional cost pools. After
analyzing manufacturing overhead costs, it was determined that number of design
changes, setups, and inspections are the primary manufacturing overhead cost drivers.
The following information was gathered during the analysis:
During 2015, two customers, Money Managers and Hospital Systems, are expected to
use the following printing services:
Using the three cost pools to allocate overhead costs, what is the total manufacturing
overhead cost estimate for Money Managers during 2015?
A) $13,700
B) $6,500
C) $6,860
D) $10,192
24) Ethical challenges for management accountants include ________.
A) whether to accept gifts from suppliers, knowing it is an effort to indirectly influence
decisions
B) adhering to the principles of accounting
C) whether to file a tax return this year
D) whether to accept gifts higher incentives from the company for their performance
25) Which of the following statements is true of variable overhead costs?
A) Variable overhead costs always have unused capacity.
B) Variable overhead costs have no production-volume variance.
C) Variable overhead costs have no spending variance.
D) Variable overhead costs have no efficiency variance.
26) Which of the following is true of sustainability?
A) It helps in implementing strategies to improvise the product.
B) It concerns with purchase of material in larger quantities.
C) It helps the development and implementation of strategies to achieve long-term
financial, social, and environmental goals.
D) It helps manufacturing firms produce products more efficiently ensuring lower costs
at an optimum use of available resources.
27) Meridian Industries manufactures and sells two models of watches, Prime and
Luxuria. It expects to sell 3,000 units of Prime and 1,000 units of Luxuria in 2016.The
following estimates are given for 2016:
Meridian had an inventory of 200 units of Prime and 75 units of Luxuria at the end of
2015 . It has decided that as a measure to counter stock outages it will maintain ending
inventory of 350 units of Prime and 200 units of Luxuria.
Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of
$10. There were 100 units of Crimpson in stock at the end of 2015.The management
does not want to have any stock of Crimpson at the end of 2016 .
How many units of Prime watches must be produced in 2016?
A) 3,350 units
B) 3,150 units
C) 3,000 units
D) 2,800 units
28) Nig Car Company manufactures automobiles. The Fastback Car Division sells its
cars for $50,000 each to the general public. The fastback cars have manufacturing costs
of $30,000 each for variable and $15,000 each for fixed costs. The division’s total fixed
manufacturing costs are $75,000,000 at the normal volume of 5,000 units.
The Coupe Car Division has been unable to meet the demand for its cars this year. It
has offered to buy 1,000 cars from the Fastback Car Division at the full cost of $40,000.
The Fastback Car Division has excess capacity and the 1,000 units can be produced
without interfering with the current outside sales of 5,000. The 6,000 volume is within
the division’s relevant operating range.
Explain whether the Fastback Car Division should accept the offer.
29) Jordana Woolens is a manufacturer of wool cloth. The information for March is as
follows:
Beginning work in process was half converted as to labor and overhead. Direct
materials are added at the beginning of the process. All conversion costs are incurred
evenly throughout the process. Ending work in process was 60% complete.
Required:
Prepare a production cost worksheet using the weighted-average method. Include any
necessary supporting schedules.
30) Explain three approaches to determining weights for the the stand-alone
revenue-allocation. Which method do managers prefer?
31) 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?
32) A hotel in Orlando, Florida, experiences peak periods and slower times. How
should prices be adjusted during peak periods? During slow times? Why?
33) Explain how a top-selling product may actually result in losses for the company.
34) The managers of the production department have decided to use the production
levels of 2015 and 2016 as examples of the highest and lowest years of operating levels.
Data for those years are as follows:
Required:
What is the cost estimating equation for the department if gallons of chemicals are used
as the cost driver?
35) Northern Corp is concerned about its declining sales, especially the reduction in the
number of customers. For the last two years, its shirts have won industry awards for
high quality and trend-setting styles. At the latest executive managers’ meeting, all were
blaming each other for the decline. After much discussion and presenting some
fact-finding information, it was determined that sales relationships were the cause of
most of the problems.
Required:
What may be some of the causes and how can the causes be detected if product quality
is not an issue?