1) Estimating the degree of completion for the calculation of equivalent units is usually
easier for conversion costs than it is for direct materials.
2) The manufacturing overhead control accounts are closed or become zero at the end
of each year.
3) The budgeted indirect cost rate is actual indirect costs divided by budgeted quantity
of the cost allocation base.
4) A favorable variance results when actual costs exceed budgeted costs.
5) All products yielded from joint product processing have some positive value to the
firm.
6) If budgeted and actual machine hours are equal, spending variance will always be
nil.
7) An operation-costing system is a hybrid-costing system applied to batches of similar,
but NOT identical, products.
8) The production-volume variance is a component of the sales-volume variance.
9) It is common to find that a small number of customers generate a high percentage of
operating income.
10) Costs of activities to sell each unit to a customer is an example of ________.
A) customer-sustaining costs
B) division-sustaining costs
C) customer output unit-level costs
D) distribution-channel costs
11) Miniature Company sells stuffed tigers. Birtal Inc. manufactures many different
stuffed animals. Miniature orders 20,800 tigers per year, 400 per week, at $15 per tiger.
The manufacturer covers all shipping costs. Miniature earns 15% on its cash
investments. The purchase-order lead time is 3 weeks. Miniature sells 310 tigers per
week. The following data are available (based on management’s estimates):
Estimated ordering costs per purchase order$22
Estimated insurance, materials handling, breakage,
and so on, per year$7
Actual ordering costs per order$25
What is the economic order quantity using the estimated amounts?
A) 637.7 stuffed tigers
B) 314.5 stuffed tigers
C) 191 stuffed tigers
D) 325 stuffed tigers
12) If the unit level of inventory increases during an accounting period, then ________.
A) less operating income will be reported under absorption costing than variable
costing
B) more operating income will be reported under absorption costing than variable
costing
C) operating income will be the same under absorption costing and variable costing
D) the exact effect on operating income cannot be determined
13) Sky High Company has two departments, X and Y. The following estimates are for
the coming year:
The budgeted indirect-cost driver rate for Y based on the number of machine-hours is in
excess of X by ________.
A) $15 per machine-hour
B) $10 per machine-hour
C) $20 per machine-hour
D) $8 per machine-hour
14) Serile Pharma places 900 units in production during the month of January. All 900
units are completed during the month. It had no opening inventory. Direct material costs
added during January was $81,000 and conversion costs added during January was
$9,000.What is the total cost per unit of the product produced during January?
A) $100
B) $90
C) $80
D) $10
15) Which of the following statements is true of a balanced scorecard?
A) The balanced scorecard reduces managers’ emphasis on long-run financial
performance.
B) The balanced scorecard reduces managers’ emphasis on short-run financial
performance.
C) The primary goal of using the balanced scorecard is to sustain short-run financial
performance.
D) The primary goal of using the balanced scorecard is to sustain short-run nonfinancial
performance.
16) Fixed costs depend on the ________.
A) amount of resources used
B) amount of resources acquired
C) volume of production
D) total number of units sold
17) The top management at Amore Corp, a manufacturer of computer games, is
attempting to recover from a flood that destroyed some of their accounting records. The
main computer system was also severely damaged. The following information was
salvaged:
Alpha Division Beta Division Gamma Division
Sales $5,500,000 (a) $2,500,000
Net operating income $3,500,000 $1,100,000 $1,200,000
Operating assets (b) (c) $1,600,000
Return on investment 0.25 0.15 (d)
Return on sales (e) 0.1 0.5
Investment turnover (f) (g) 1.5
What is the Gamma Division’s return on investment (d)?
A) 0.25
B) 0.45
C) 0.60
D) 0.75
18) Which of the following journal entries is used to record fixed overhead costs
allocated?
A) Fixed Overhead Allocated
Work-in-Process Control
B) Work-in-Process Control
Fixed Overhead Allocated
C) Fixed Overhead Control
Work-in-Process Control
D) Fixed Overhead Allocated
Fixed Overhead Control
19) Veach Corporation incurred fixed manufacturing costs of $6,000 during 2015. Other
information for 2015 includes:
The budgeted denominator level is 1,000 units.
Units produced total 750 units.
Units sold total 600 units.
Beginning inventory was zero.
The company uses variable costing and the fixed manufacturing cost rate is based on
the budgeted denominator level. Manufacturing variances are closed to cost of goods
sold.
Fixed manufacturing costs included in ending inventory total ________.
A) $1,200
B) $1,500
C) $900
D) 0
20) The following information pertains to Razor’s Corp:
What is the manufacturing cost for the ending finished goods inventory?
A) $42,500
B) $25,500
C) $18,500
D) $30,500
21) Bromint Company provided the following information:
Budgeted input89,500gallons
Actual input87,700gallons
Budgeted production42,000units
Actual production43,000units
What is the partial productivity ratio?
A) 2.13 units per gallon
B) 0.47 units per gallon
C) 0.49 units per gallon
D) 2.03 units per gallon
22) Jamal, Kareem, Rashid and Associates are in the process of evaluating its new
client services for the business consulting division.
Estate Planning, a new service, incurred $100,000 in development costs and employee
training.
The direct costs of providing this service, which is all labor, averages $27 per hour.
Other costs for this service are estimated at $400,000 per year.
The current program for estate planning is expected to last for two years. At that time, a
new law will be in place that will require new operating guidelines for the tax
consulting.
Customer service expenses average $95 per client, with each job lasting an average of
400 hours. The current staff expects to bill 40,000 hours for each of the two years the
program is in effect. Billing averages $42 per hour.
What is the estimated life-cycle operating income for the first two years?
A) $3,360,000
B) $281,000
C) $190,500
D) $90,500
23) Schotte Manufacturing Company uses two different independent variables
(machine-hours and number of packages) in two different equations to evaluate costs of
the packaging department. The most recent results of the two regressions are as follows:
Machine-hours:
r2 = 0.33
Number of packages:
r2 = 0.73
Required:
a.What are the estimating equations for each cost driver?
b.Which cost driver is best and why?
24) A flexible-budget variance is $600 favorable for unit-related costs. This indicates
that costs were ________.
A) $600 more than the master budget
B) $600 less than for the planned level of activity
C) $600 more than standard for the achieved level of activity
D) $600 less than standard for the achieved level of activity
25) In the above table, the amounts for (A) and (B), respectively, are ________.
A) $22,500 U; $110,000 U
B) $22,500 U; Zero
C) Zero; $110,000 U
D) Zero; Zero
26) Moto Corp allows its divisions to operate as autonomous units. The operating data
for 2015 follow:
Required:
a.Compute the investment turnover for each division.
b.Compute the return on sales for each division.
c.Compute the return on investment for each division.
d.Which division manager is doing best? Why?
e.What other factors should be included when evaluating the managers?
For parts (b) and (c) income is defined as operating income.
27) ________ have no measurable cause-and-effect relationship between output and
resources used.
A) Engineered costs
B) Discretionary costs
C) Marginal costs
D) Manufacturing costs
28) When the selling prices of all products at the splitoff point are unavailable, the
________ is the best alternative for allocating joint costs.
A) sales value at splitoff method
B) NRV method
C) physical measures method
D) constant gross-margin percentage method