Which of the following employees is typically held accountable for the direct materials
price variance?
a. Controller
b. Purchasing Manager
c. Production Manager
d. Engineering Department Manager
Which of the following is not a short-term tactical benefit of outsourcing a company ‘s
operations?
a. Release capital funds for use in other projects
b. Frees managers ‘ time to focus on more important issues
c. Reduces and controls operating costs
d. Provides a cash infusion as freed-up assets are sold
The algebraic equation for the direct labor efficiency variance is
a. Direct labor efficiency variance = AQ x (AP – SP).
b. Direct labor efficiency variance = SQx (AP – SP).
c. Direct labor efficiency variance = SP x (AQ – SQ).
d. Direct labor efficiency variance = AP x (AQ – SQ).
Sterling Industries manufactures saddles for show horses. Sterling’s actual fixed
overhead for the year was $123,400. During the year Sterling produced 12,300 saddles
using 129,150 direct labor hours. Sterling had budgeted to produce 13,000 saddles and
had budgeted to use 130,000 direct labor hours. Sterling’s fixed overhead spending
variance was $4,200 favorable for the year. What was Sterling’s budgeted fixed
overhead for the year (if necessary, round your answer to the nearest dollar)?
a. $140,257
b. $127,600
c. $120,955
d. $128,412
The direct labor rate variance arises when
a. Actual wage rates differ from the standard wage rate.
b. Actual hours worked differ from budgeted hours.
c. Standard wage rates do not match last year’s rates.
d. Last year’s actual hours worked do not match this year’s hours worked.
Direct material variance is a measure of
a. Outcomes.
b. Inputs.
c. Qualitative factors.
d. None of these answer choices are correct.
Keltner Enterprises is considering investing in a new packing machine. The new
machine will provide annual cash operating inflows of $12,300 for 5 years. The cost of
the machine is $42,300 and it can be sold at the end of its 5-year useful life for $6,800.
Keltner’s required rate of return is 10%. What is the machine’s net present value?
a. ($105)
b. $13,211
c. $8,549
d. $15,278
Which of the following is a difference between job order costing and process costing
systems?
a. Companies that use a process costing system accumulate product costs throughout
the production process while companies that use a job order costing system accumulate
product cost only at the end of the production process.
b. Companies that use a process costing system accumulate direct material and direct
labor, but not manufacturing overhead while companies that use a job order costing
systems accumulate direct material, direct labor and manufacturing overhead.
c. Companies that use a process costing system accumulate product costs on the
departmental production report while companies that use a job order costing system
accumulate product costs on the job cost sheet.
d. All of these answer choices are differences between process costing and job order
costing systems.
Jenny’s Cutting Station is a new concept in haircuts; low cost and very quick. Set in a
local mall, Jenny’s offers 15 minute haircuts for harried shoppers who do not have time
for lengthy appointments. To ensure that the clients are in and out quickly, she
schedules her 5 employees based on expected client traffic. Each of the employees is
paid $1,200 per month, with part of their pay coming from client tips. Jenny pays rent
and overhead costs of $2,000 per month. Because of the quick nature of the service,
Jenny doesn’t have time to clean combs in between clients, so she uses a new comb for
each customer, at a cost of $.55 each. She also provides shampoo and conditioner for
each client at a cost of $.95 per client. The average price for a haircut is $12. Jenny pays
herself $5,000 per month. What is Jenny’s contribution margin ratio?
a.12.5%
b.83.5%
c.87.5%
d.8.3%
Diablo Corporation ‘s Western region operates as an investment center. John Mosby, the
division ‘s director, is considering investing in manufacturing equipment with a cost of
$120,000. The equipment is expected to generate $35,000 in additional operating
income. If the weighted average cost of capital is 18%, what is the equipment ‘s EVA?
a. $35,000
b. $21,600
c. $13,400
d. None of these answer choices are correct
Determine the fixed cost given the following information:
Lowest level of activity – 200 units at a total cost of $600
Highest level of activity – 800 units at a total cost of $1,800
a.$200
b.$360
c.$480
d.$600
Which of the following is not a step in calculating EVA?
a. Calculate net operating profit
b. Calculate invested capital
c. Calculate the weighted average cost of capital
d. All of these answer choices are steps in calculating EVA
Contribution margin is the amount
a. That is available to cover fixed costs and provide a profit.
b. Of total variable costs and total fixed costs.
c. Sales less cost of goods sold.
d. Of fixed costs.
The division director for Natchez Corporation ‘s Mississippi division, which operates as
an investment center, is considering investing in machinery which costs of $2,200,000
and is expected to generate $332,000 in additional operating income. If the division ‘s
weighted average cost of capital is 11% and its tax rate is 20%, what is the equipment ‘s
EVA?
a. $23,600
b. $90,000
c. $242,000
d. $332,000
As part of their continuing effort to improve business processes to deliver maximum
value to their customers, many business have adopted one or more of the following
systems:
a.Supply chain management
b.Just-in-time-inventory (JIT)
c.Enterprise resource planning (ERP) systems
Which of the following cash flows results from an investing activity?
a. Paying rent on a crane to be used to move warehouse equipment
b. Purchasing inventory for cash
c. Purchasing a new forklift
d. Purchasing 5% of the company’s own outstanding common stock
Identify relevant information for decision making.
Calculate the level of activity required to meet a target income.
The following information relating to fixed overhead is available for Haven Industries:
Which of the following is the correct journal entry to record the spending and efficiency
variances?
Discuss the terms “Cost-plus pricing” and “target costing”. What are some advantages
and disadvantages of each?
Adler Industries uses a standard cost system. Adler has established the following
standards for one unit of product: standard labor of .25 hour and standard wage rate of
$8 per hour. During January, Adler used 5,000 hours of direct labor and paid $37,800 in
wages in producing 18,700 units.
Required:
Calculate the direct labor efficiency variance and indicate whether the variance is
favorable or unfavorable.
Describe the differences between managerial and financial accounting
An organization may be structured as a centralized or decentralized decision-making
environment. Classify each of the following as a characteristic of a centralized or
decentralized by placing an “X” in the appropriate column.
Variable overhead cost consists of indirect production costs that are expected to vary
with production activity. How is the variable overhead spending variance calculated and
list potential causes of the variance?
A balanced scorecard should include five to seven measures in each of four
perspectives: Learning and growth, internal business processes, customer, and financial.
Required:
List five measures that relate to the customer perspective.