1) In joint costing, the constant gross-margin percentage method recognizes that the
profit margin is not just attributable to the joint process but is also derived from the
costs incurred after splitoff.
2) Computer-based systems, such as ERP systems, cannot perform calculations for
financial planning models.
3) Most computer-based financial planning models have difficulty incorporating
sensitivity (what-if) analysis.
4) A planned increase in advertising would be considered an increase in variable costs
in CVP analysis.
5) Thread that is used in the production of mattresses is an indirect material that is
therefore classified as manufacturing overhead.
6) Manufacturing cycle times affect both revenues and costs.
7) The treasurer (also called the chief accounting officer) is the financial executive
primarily responsible for both management accounting and financial accounting.
8) Ventaz Corp manufactures keyboards. The manufacturing cycle efficiency is 40%.
What is its manufacturing time for value added if the manufacturing lead time is 120
minutes per keyboard?
A) 38.50 minutes
B) 60.00 minutes
C) 48.00 minutes
D) 54.00 minutes
9) Can the variable overhead efficiency variance
a.be computed the same way as the efficiency variance for direct-cost items?
b.be interpreted the same way as the efficiency variance for direct-cost items? Explain.
10) The learning-curve models presented in the text examine ________.
A) how quality increases over time
B) how efficiency increases as more units are produced
C) how setup costs decline as more workers are added
D) the change in variable costs when quantity discounts are available
11) ________ is a method of inventory costing in which only variable manufacturing
costs are included as inventoriable costs.
A) Fixed costing
B) Variable costing
C) Absorption costing
D) Mixed costing
12) When variable overhead efficiency variance is favorable, it can be safely assumed
that the ________.
A) actual rate per unit of the cost-allocation base is higher than the budgeted rate
B) actual quantity of the cost-allocation base used is higher than the budgeted quantity
C) actual rate per unit of the cost-allocation base is lower than the budgeted rate
D) actual quantity of the cost-allocation base used is lower than the budgeted quantity
13) Cost reductions can be the result of ________.
A) price increments
B) congestion due to scheduling a large number of rush orders
C) producing products faster and more efficiently
D) inappropriate assignment of labor or machines to specific jobs
14) Sales-mix variance = $300,000 (F), sales-quantity variance = $200,000(F),
flexible-budget variance = $100,000(F), market-size variance = $50,000(U), calculate
the sales-volume variance.
A) $650,000 (F)
B) $450,000 (F)
C) $550,000 (F)
D) $500,000 (F)
15) Customer relationship management initiatives use technology to coordinate all
________.
A) advertising and marketing techniques to attract customers
B) research activities
C) customer-facing activities
D) quality control management activities
16) Auto Tires has been in the tire business for four years. It rents a building but owns
all of its equipment. All employees are paid a fixed salary except for the busy season
(April-June), when temporary help is hired by the hour. Utilities and other operating
charges remain fairly constant during each month except those in the busy season.
Selling prices per tire average $75 except during the busy season. Because a large
number of customers buy tires prior to winter, discounts run above average during the
busy season. A 15% discount is given when two tires are purchased at one time. During
the busy months, selling prices per tire average $60.
The president of Auto Tires is somewhat displeased with the company’s management
accounting system because the cost behavior patterns displayed by the monthly
breakeven charts are inconsistent; the busy months’ charts are different from the other
months of the year. The president is never sure if the company has a satisfactory margin
of safety or if it is just above the breakeven point.
Required:
a.What is wrong with the accountant’s computations?
b.How can the information be presented in a better format for the president?
17) As per CVP, operating income calculations use ________.
A) net income and dividends
B) income tax expense and net income
C) contribution margins and fixed costs
D) nonoperating revenues and nonoperating expenses
18) The only difference between variable and absorption costing is the expensing of
________.
A) direct manufacturing costs
B) variable marketing costs
C) fixed manufacturing costs
D) variable administrative costs
19) Using the high-low method of analysis, the estimated variable cost per machine
hour for electricity is closest to:
A) $3.40
B) $2.14
C) $1.00
D) $0.87
20) Product costing information will include ________.
A) to increase profits
B) to increase sales and image of the company
C) for cost management
D) for efficient human resource management
21) 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 operating income for 2014?
A) $9,000,000
B) $11,200,000
C) $11,440,000
D) $9,207,000
22) The Allianz Company produces a specialty wood furniture product, and has the
following information available concerning its inventory items:
Relevant ordering costs per purchase order$450
Relevant carrying costs per year for each package:
Required annual return on investment15%
Required other costs per year$4
Annual demand is 30,000 packages per year. The purchase price per package is $48.
If Kenton Inc. has a safety stock of 175 units and the average weekly demand is 25
units, how many days can be covered if the shipment from the supplier is delayed by 12
days?
A) 12 days
B) 49 days
C) 61 days
D) 37 days
23) Sodius Chemical Inc. placed 220,000 liters of direct materials into the mixing
process. At the end of the month, 5,000 liters were still in process, 30% converted as to
labor and factory overhead. All direct materials are placed in mixing at the beginning of
the process and conversion costs occur evenly during the process. Sodius uses
weighted-average costing.
Required:
a.Determine the equivalent units in process for direct materials and conversion costs,
assuming there was no beginning inventory.
b.Determine the equivalent units in process for direct materials and conversion costs,
assuming that 12,000 liters of chemicals were 40% complete prior to the addition of the
220,000 liters.
24) What is the contribution margin using variable costing?
A) $118,625
B) $125,125
C) $126,425
D) $135,625
25) For each of the following activities, characteristics, and applications, identify
whether they can be found in a centralized organization, a decentralized organization, or
both types of organizations.
________a.Freedom for managers at lower organizational levels to make decisions
________b.Gathering information may be very expensive
________c.Greater responsiveness to user needs
________d.Have few interdependencies among divisions
________e.Maximum constraints and minimum freedom for managers at lowest levels
________f.Maximization of benefits over costs
________g.Minimization of duplicate functions
________h.Minimum of suboptimization
________i.Multiple responsibility centers with various reporting units
________j.Profit centers
26) Which of the following statements is true of Kenton’s joint cost allocations?
A) The gross margin is same for both products because constant gross margin
percentage NRV method ignores profits earned before the splitoff point.
B) One product can receive negative joint costs allocations to bring the other
unprofitable product to the overall average gross margin.
C) Kenton has chosen the easiest method for allocating its joint costs of production.
D) The gross profit percent of condensed milk is lower than the gross profit of butter
cream.
27) The manufacturing manager of New Technology Company is concerned about the
company’s newest plant. When the plant began operations three years ago, it had the
best of everything. It had modern equipment, well-trained employees, engineered work
and assembly stations, and a controlled environment. During the first two years, the
evaluation results were very good with almost all cost variances being favorable.
However, recently, things have turned negative.
In recent months, everything seems to be operating in a crisis management mode.
Although most cost variances remain favorable, the plant’s segment contribution is
declining and customers are complaining about poor quality and slow delivery. Several
customers have suggested that they may take their business elsewhere if things do not
improve.
The shop floor is in continual turmoil. In-process inventory is everywhere, production
employees have difficulty finding jobs that need to be worked on, and scheduling has
requested a larger computer to keep track of work in process.
The vice president of sales does not know where to begin with solving the customers’
problems. It seems that everyone is working very hard and the plant has the best
facilities and trained employees in the industry.
Required:
What is the nature of the plant’s problems? What recommendation would you make to
help improve the situation?
28) Clark Manufacturing offers two product lines, IN2 and EL5. The demand of the IN2
product line is inelastic, while the demand of the EL5 product line is very elastic. If
Clark initiates a price increase for both product lines, how will customer demand
change? How will the price increase affect operating profits?
29) When is a company said to be engaged in predatory pricing? What are the primary
conditions to be satisfied to prove predatory pricing?
30) What are the direct costs of a job and in which source documents are they recorded?
31) What are three possible ways to dispose of underallocated or overallocated
overhead costs at the end of a fiscal year? Briefly comment on the theoretical
correctness or incorrectness of each method.
32) Describe some of the drawbacks of using the operating budget as a control device.