1) Tax deductions for depreciation result in tax savings that partially offset the cost of
acquiring the capital asset.
2) Companies that implement JIT purchasing will emphasize developing short-term
supplier relationships to attain flexibility.
3) To comply with GAAP, backflush cost numbers can be adjusted by recording a
journal entry.
4) Management control systems is designed only for top level managers and is not
applicable to line managers.
5) U.S. tax reporting requires end-of-period reconciliation between actual and applied
indirect costs using the adjusted allocation-rate method or the proration method.
6) Sales margin = Contribution margin percentage x Revenues (in dollars).
7) The dual-rate cost-allocation method provides better information for decision making
than the single-rate method as it differentiates between fixed and variable costs and its
allocation.
8) As product diversity and indirect costs increase, it is usually best to switch away
from a broad averaging system to an activity-based cost system.
9) In a period of falling prices, the lower cost of goods sold under the FIFO method
leads to higher operating income and higher tax payments.
10) Both, the standard-costing method and FIFO, assumes that the earliest equivalent
units in beginning work in process are completed first.
11) The flexible-budget variance is the total of price variance and efficiency variance.
12) The sales-mix variance can be explained in terms of the budgeted contribution
margin per composite unit of the sales mix.
13) Direct costs ________.
A) are anything for which a measurement of costs is desired
B) are costs related to a particular cost object that can be traced to that cost object in a
cost-effective manner
C) focus specifically on the costing needs of the CFO
D) are costs related to a particular cost object that cannot be traced to that cost object in
a cost-effective manner
14) Genend’s Good Value Appliance Store is a small company that has hired you to
perform some management advisory services. The following information pertains to
2015 operations.
What were the total fixed costs for 2015?
A) $1,392,200
B) $380,000
C) $350,000
D) $1,012,200
15) Aurous Incorporated planned to use $35 of material per unit but actually used $34
of material per unit, and planned to make 1,500 units but actually made 1,300 units.
The sales-volume variance for materials is ________.
A) $7,000 favorable
B) $7,000 unfavorable
C) $6,800 unfavorable
D) $6,800 favorable
16) Kason, Inc., expects to sell 20,000 pool cues for $12.00 each. Direct materials costs
are $2.00, direct manufacturing labor is $4.00, and manufacturing overhead is $0.80 per
pool cue. The following inventory levels apply to 2016:
What are the 2016 budgeted costs for direct materials, direct manufacturing labor, and
manufacturing overhead, respectively?
A) $48,000; $96,000; $19,200
B) $44,000; $88,000; $17,600
C) $41,000; $82,000; $16,400
D) $40,000; $80,000; $16,000
17) If 1,000 units are produced and only 700 units are sold, ________ results in the
greatest amount of expense reported on the income statement.
A) throughput costing
B) variable costing
C) absorption costing
D) period costing
18) Which of the following is the correct mathematical expression to calculate partial
productivity?
A) Sales value of output produced Quantity of all inputs used
B) Quantity of output produced Quantity of input used
C) Quantity of output produced Costs of all inputs used
D) Sales value of output produced Cost of inputs required to produce current year
production in previous year
19) Which of the following costs, if expressed on a per unit basis, would be expected to
decrease as the level of production and sales increases?
A) Sales commissions.
B) Fixed manufacturing overhead.
C) Variable manufacturing overhead.
D) Direct materials.
20) Following a strategy of product differentiation, Sting Corporation makes a high-end
computer monitor, CM7. Sting Corporation presents the following data for the years
2012 and 2013:
Sting Corporation produces no defective units but it wants to reduce direct materials
usage per unit of CM7 in 2013. Manufacturing conversion costs in each year depend on
production capacity defined in terms of CM7 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. Sting Corporation has 100 customers in 2012
and 115 customers in 2013. The industry market size for high-end computer monitors
increased 5% from 2012 to 2013.
Required:
a.What is operating income for 2012?
b.What is operating income in 2013?
c.What is the change in operating income from 2012 to 2013?
21) Which of the following statements shows a difference between simple regression
and multiple regression?
A) Simple regression uses more than one dependent and independent variables, whereas
multiple regression uses only one dependent and independent variable.
B) Simple regression uses only the independent variables, whereas multiple regression
uses only dependent variables.
C) Simple regression uses only one dependent and one independent variable, whereas
multiple regression uses one dependent and more than one independent variable.
D) Simple regression uses only one dependent variable and more than one independent
variables, whereas multiple regression uses more than one dependent variable and only
one independent variable.
22) For Divaxo Company, labor-hours are 30,000 and wages $130,000 at the high point
of the relevant range, and labor-hours are 18,000 and wages $85,000 at the low point of
the relevant range.
What is the slope coefficient?
A) $4.45
B) $3.75
C) $4.33
D) $4.72
23) Lucas Manufacturing has three cost objects that it uses to accumulate costs for its
manufacturing plants. They are:
Cost object #1: The physical buildings and equipment
Cost object #2: The use of buildings and equipment
Cost object #3: The availability and use of manufacturing labor
The following manufacturing overhead cost categories are found in the accounting
records:
a.Depreciation on buildings and equipment
b.Lubricants for machines
c.Property insurance
d.Supervisors salaries
e.Fringe benefits
f.Property taxes
g.Utilities
Required:
Assign each of the above costs to the most appropriate cost object.
24) In joint costing, the potential conflict between cost concepts used for decision
making and cost concepts used for evaluating the performance of managers will be
most severe when the ________ method is used.
A) sales value at splitoff
B) physical measure
C) constant gross-margin percentage NRV
D) estimated NRV
25) For February, the cost components of a picture frame include $0.30 for the glass,
$0.75 for the wooden frame, and $0.80 for assembly. The assembly desk and tools cost
$500. Two hundred fifty frames are expected to be produced in the coming year. What
cost function best represents these costs?
A) y = 1.85 + 500X
B) y = 500 + 1.85X
C) y = 3.85 + 600X
D) y = 1.05 + 500X
26) How can a company’s revenues and costs differ across customers?
27) The following data for the telephone company pertain to the production of 450 rolls
of telephone wire during June. Selected items are omitted because the costing records
were lost in a windstorm.
Direct Materials (All materials purchased were used.)
Standard cost per roll: a pounds at $4.00 per pound.
Total actual cost: b pounds costing $9,600.
Standard cost allowed for units produced was $9,000.
Materials price variance: c .
Materials efficiency variance was $80 unfavorable.
Direct Manufacturing Labor
Standard cost is 3 hours per roll at $8.00 per hour.
Actual cost per hour was $8.25.
Total actual cost: d .
Labor price variance: e .
Labor efficiency variance was $400 unfavorable.
Required:
Compute the missing elements in the report represented by the lettered items.
28) For supply item ABC, Andrews Company has been ordering 125 units based on the
recommendation of the salesperson who calls on the company monthly. A new
purchasing agent has been hired by the company who wants to start using the
economic-order-quantity method and its supporting decision elements. She has gathered
the following information:
Required:
Determine the EOQ, average inventory, orders per year, average daily demand, reorder
point, annual ordering costs, and annual carrying costs.
29) Kaiser Company just hired its fourth production manager in three years. All three
previous managers had quit because they could not get the company above the
break-even point, even though sales had increased somewhat each year. The company
was operating at about 60 % of plant capacity. The flatware industry was growing, so
increased sales were not out of the question.
I. R. Thinking took the job as manager of the production division with a very attractive
salary package. After interviewing for the position, he proposed a salary and bonus
package that would give him a very small salary but a large bonus if he took the
operating income (using absorption costing) above the breakeven point during his very
first year.
Required:
What do you think Mr. Thinking had in mind for increasing the company’s operating
income?
30) There are basically two distinct methods of calculating product costs.
Required:
Compare and contrast the two methods.
31) Van Meter Fig Company has substantial fluctuations in its production costs because
of the seasonality of figs.
Would you recommend an actual or budgeted allocation base? Why? Would you
recommend calculating monthly, seasonal, or annual allocation rates? Why?
32) Explain why some companies carry their inventories at NRV minus an estimated
operating income margin instead of the NRV itself.
33) Cedile Trailer Supply has received three proposals for its new trailer assembly line.
Information on each proposal is as follows:
Required:
Determine each proposal’s payback.
34) When cost-based transfer pricing is used between subunits of a large organization,
describe how to avoid making suboptimal decisions.
35) Munir Hassan, controller, gathered data on overhead costs and direct labor-hours
over the past 12 months. List and discuss the different approaches Munir can use to
estimate a cost function for overhead costs using direct labor-hours as the cost driver.