1) The issue of “allowable costs” is applicable in government cost-plus contracts.
2) An important consideration in designing compensation arrangements is the tradeoff
between creating incentives and imposing risks.
3) The key to a company’s success is always to be the low cost producer in a particular
industry.
4) For benchmarking purposes it is best to use master-budget capacity because all
competitors use about the same about of capacity for production.
5) Manufacturing sector firms normally hold three types of inventory: direct materials
inventory, work-in-process inventory, and finished goods inventory.
6) In the “make decisions by choosing among alternatives” stage of the capital
budgeting process, a company determines which investment yields the greatest benefit
and the least cost to the organization.
7) The product or service transferred between subunits of an organization is called an
intermediate product.
8) A favorable variance can be automatically interpreted as “good news.”
9) Data collection problems can arise when extreme values of observations occur.
10) In determining whether to keep a machine or replace it, the original cost of the
machine is a sunk cost and is NOT a relevant factor.
11) Rolling budgets help in reducing budgetary slack.
12) Costs in a homogeneous cost pools have the same or a similar cause-and-effect or
benefits-received relationship with the cost-allocation base.
13) Sport-in Corporation manufactured 10,000 golf bags during April. The following
fixed overhead data pertain to March:
Which of the following statements is true of fixed overhead variances?
A) The difference between actual costs and static budget costs will give the production
volume variance.
B) The difference between actual costs and static budget costs will always be nil.
C) The difference between actual costs and flexible budget costs will give the
production volume variance.
D) The difference between flexible budget costs and static budget costs will always be
nil.
14) The marketing manager’s performance evaluation is most fair when based on a
denominator level using ________.
A) practical capacity
B) theoretical capacity
C) master-budget capacity utilization
D) normal capacity utilization
15) The sales value at splitoff method ________.
A) allocates joint costs to joint products on the basis of the relative total sales value at
the splitoff point
B) allocates joint costs to joint products on the basis of a comparable physical measure
at the splitoff point
C) allocates joint costs to joint products on the basis of relative NRV
D) allocates joint costs to joint products in a way that each product has an identical
gross-margin percentage
16) Which of the following is true of plant utility costs?
A) It increases the Materials Control account.
B) It increases the Manufacturing Overhead Control account.
C) It increases the Work-in-Process Control account.
D) It is a direct cost.
17) When a Bakery transfers goods from the Mixing Department to the Baking
Department, the accounting entry is ________.
A) Work in Process Mixing Department
Work in Process Baking Department
B) Work in Process Baking Department
Accounts Payable
C) Work in Process Baking Department
Work in Process Mixing Department
D) Work in Process Mixing Department
Accounts Payable
18) Shiffon Electronics manufactures music player. Its costing system uses two cost
categories, direct materials and conversion costs. Each product must pass through the
Assembly Department, the Programming department, and the Testing Department.
Direct materials are added at the beginning of the production process. Conversion costs
are allocated evenly throughout production. Shiffon Electronics uses weighted-average
costing.
The following information is available for the month of March 2015 for the Assembly
department.
The cost details for the month of March are as follows:
What amount of conversion costs is assigned to the ending Work-in-Process account for
April?
A) $140,952
B) $95,000
C) $70,476
D) $247,500
19) Activity-based budgeting makes it easier to ________.
A) determine a rolling budget
B) prepare pro forma financial statements
C) determine how to reduce costs
D) execute a financial budget
20) The lower the inputs for a given set of outputs or the higher the outputs for a given
set of inputs, the higher the level of ________.
A) overallocation
B) expenditure
C) productivity
D) labor costs
21) Match each one of the examples below with one of the stages of the capital
budgeting decision model.
Stages:
1.Identify Projects
2.Obtain Information
3.Make Predictions
4.Make Decisions by Choosing Among Alternatives
5.Implement the Decision, Evaluate Performance, and Learn
________a.Issuing corporate stock for the funds to purchase new equipment
________b.Learning how to effectively operate Machine #8 only takes 15 minutes
________c.The need to reduce the costs to process the vegetables used in producing
goulash
________d.Monitoring the costs to operate a new machine
________e.Percentage of defective merchandise considered too high
________f.Will introducing the new product substantially upgrade our image as
a producer of quality products?
________g.Estimating yearly cash flows and setting investment budgets accordingly
using
a 12-year planning horizon.
________h.Use of the internal rate of return for each alternative
________i.Tracking realized cash flows and comparing against estimated numbers.
22) Which of the following satisfies the DuPont method of profitability analysis?
A) Income / Investment = Income / Total costs + Revenues / Equity
B) Income / Investment = Income / Revenues + Revenues / Investment
C) Income / Investment = Income / Revenues xRevenues / Investment
D) Income / Investment = Income / Total costs xRevenues / Equity
23) Jarvis Golf Company sells a special putter for $20 each. In March, it sold 28,000
putters while manufacturing 30,000. There was no beginning inventory on March 1.
Production information for March was:
Required:
a.Compute the cost per unit under both absorption and variable costing.
b.Compute the ending inventories under both absorption and variable costing.
c.Compute operating income under both absorption and variable costing.
