Archives: Quiz

1) In each of the following industries, identify possible joint (or severable) products at the splitoff point. a.Coal b.Petroleum c.Dairy d.Lamb e.Lumber f.Cocoa Beans g.Christmas Trees h.Salt i.Cowhide 2) Under backflush costing approach, the purchase of materials is ________. A) […]

1) Process costing ________. A) allocates all product costs, including materials, and labor B) results in different costs for different units produced C) is commonly used by general contractors who construct custom-built homes D) is used exclusively in manufacturing 2) […]

1) 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 […]

1) Customer response time comprises of ________. A) manufacturing cycle time and delivery time only B) receipt time and manufacturing cycle time only C) receipt time, manufacturing cycle time, and delivery time D) manufacturing time and delivery time only 2) […]

1) In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are ________. A) allocated costs B) budgeted costs C) fixed costs D) variable costs 2) ________ is the continuing reduction in the […]

1) Lukehart Industries, Inc., produces air purifiers. Lukehart, Inc., produces the air purifiers in batches. To manufacture a batch of the purifiers, Lukehart, Inc., must set up the machines and assembly line tooling. Setup costs are batch-level costs because they […]

1) The Fortise Corporation manufactures two types of vacuum cleaners, the Victor for commercial building use and the House-Mate for residences. Budgeted and actual operating data for the year 2015 were as follows: What is the contribution margin for the […]

1) Variable cost per labor-hour is $8.50. Fixed cost is $10,500. Calculate the total cost for 350 labor hours. Machine hours during the period are 50. A) $10,925 B) $13,475 C) $13,900 D) $3,400 2) Which of the following is […]

1) The economic order quantity model completely ignores ________. A) carrying costs B) ordering costs C) stockout costs D) the size of a purchase order 2) Ways to “produce for inventory” that result in increasing operating income include ________. A) […]

1) Fixed costs remain constant at $400,000 per month. During high-output months variable costs are $320,000, and during low-output months variable costs are $80,000. What are the respective high and low indirect-cost rates if budgeted professional labor-hours are 16,000 for […]

1) Pearl Manufacturing Company provides glassware machines for major department store retailers. The company has been investigating a new piece of machinery for its production department. The old equipment has a remaining life of five years and the new equipment […]

1) In a combined 3-variance analysis, the total spending variance would be ________. A) $20,500 F B) $22,500 U C) $20,500 U D) $37,500 F 2) The gross margin for April was: A) $1,465,600 B) $3,960,400 C) $1,017,600 D) $600,400 […]

1) Which of the following is an example of division-sustaining costs? A) research and development cost B) corporate administration costs C) corporate brand advertising D) shipment costs 2) Beta Corp reported the following: Required: a.Compute contribution margin. b.Compute gross margin. […]

1) Ridez Manufacturing currently produces 1,000 bicycles per month. The following per unit data apply for sales to regular customers: The plant has capacity for 3,000 bicycles and is considering expanding production to 2,000 bicycles. What is the per unit […]

1) Comfort Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled: Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an […]

1) Budgeted production equals ________. A) beginning finished goods inventory + budgeted unit sales – targeted ending finished goods inventory B) targeted ending finished goods inventory + beginning finished goods inventory – budgeted unit sales C) budgeted unit sales + […]

1) The cash budget is a schedule of expected cash receipts and disbursements that ________. A) requires an aging of accounts receivable and accounts payable B) is a self-liquidating cycle C) is prepared immediately after the sales forecast D) predicts […]

1) Budgeted fixed manufacturing costs of a product using practical capacity ________. A) represents the cost per unit of supplying capacity B) can result in setting selling prices that are not competitive C) includes the cost of unused capacity D) […]

1) The prime cost for September was: A) $114,000 B) $100,000 C) $103,000 D) $47,000 2) Netzone Company is in semiconductor industry and fabrication of silicon-wafer chips splits off two types of memory chips, Standard and Premium. The following information […]

1) To prepare budgets based on actual data from past periods is preferred since past inefficiencies are EXCLUDED. 2) Indirect costs such as rent, telephone, and depreciation are always costs of the period in which they are incurred and are […]

1) Direct material price variance is likely to be unfavorable if the purchasing manager switched to a lower-price supplier. 2) A linear cost function can only represent fixed cost behavior. Answer: FALSE Explanation: A linear cost function can represent fixed, […]

1) A customer cost hierarchy may include distribution-channel costs. 2) Effort in terms of management control systems is defined in terms of physical exertion such as a worker producing at a faster rate. Answer: FALSE Explanation: Effort goes beyond physical […]

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 […]

1) Productivity describes the relationship between different quantities of inputs consumed and the quantities of output produced. 2) When budgeted cost-allocation rates are used, variations in actual usage by one division affect the costs allocated to other divisions. Answer: FALSE […]

1) Jacob’s Manufacturing sales is equal to production.If Jacob’s Manufacturing presented a Financial Accounting Income Statement emphasizing gross margin showing operating income of $180,000, a Contribution Income Statement emphasizing contribution margin would show a different operating income. 2) A firm […]

1) Sensitivity analysis is a useful tool that helps managers evaluate risks. 2) Discretionary costs arise from periodic (usually annual) decisions regarding the maximum amount to be incurred. Answer: TRUE 3) Commissions paid to salespersons are a variable selling expense. […]

1) In joint costing, the physical measures are generally used for products or services that are processed and, after splitoff, additional value is added to the product and a selling price can be determined. 2) The Required Rate of Return […]

1) Direct materials and direct manufacturing labor become a part of work-in-process inventory on the balance sheet because the direct manufacturing labor transforms the direct materials to another asset, work-in-process inventory. 2) Service-sector companies have no use of variance analysis […]

1) Product-cost cross-subsidization is very common when costs are uniformly spread across various products. 2) The net present value (NPV) method calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows […]

1) Determining the “right” level of capacity is one of the most strategic and difficult decisions managers face. 2) The difference between total revenues and total variable costs is called contribution margin. Answer: TRUE 3) Multiple regression analysis estimates the […]

1) Job costing system is an example of absorption costing. 2) When calculating the equivalent units, we should only focus on dollar amounts of inventory. Answer: FALSE Explanation: When calculating the equivalent units, we should disregard dollar amounts and focus […]

1) Fixed costs are sometimes allocated to individual products as part of the standard costing system. When this is the case, they should be treated as variable costs for purposes of future cost estimation. 2) A composite unit is a […]

1) A learning curve measures the effect of learning on efficiency. 2) From the perspective of control, the direct materials price variance should be isolated at the time of sales. Answer: FALSE Explanation: From the perspective of control, the direct […]

1) A variance is the difference between the actual cost for the current and expected (or budgeted) performance. 2) Operating income plus total fixed costs equals the contribution margin. Answer: TRUE Explanation: Total revenues less total variable costs equal the […]

1) Use of practical capacity results in an unrealistically small fixed manufacturing cost per unit because it is based on an idealistic and unattainable level of capacity. 2) A company should use the same denominator level capacity for all the […]

1) Rework labor time is considered an overhead cost and not a direct labor cost. 2) As a company reduces its inventory levels, operating income differences between absorption costing and variable costing become immaterial. Answer: TRUE 3) A company usually […]

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. Answer: TRUE 3) The key to a company’s success is always […]

1) If one of five distribution channels is discontinued, corporate-sustaining costs such as general administration costs will most likely be reduced by 20%. 2) Management accountants must promote fact-based analysis and make tough-minded, critical judgments without being adversarial. Answer: TRUE […]

1) Contribution margin = Contribution margin percentage x Revenues (in dollars). 2) It is best to rely totally on financial performance measures rather than using a combination of financial and nonfinancial performance measures. Answer: FALSE Explanation: It is best to […]

1) Bonuses given to employees based on performance is an example of extrinsic reward. 2) The breakeven points are the same under both variable costing and absorption costing. Answer: FALSE Explanation: The breakeven points are generally different under both variable […]

1) Quality-inspection costs is an example of batch-level costs. 2) Identifying and minimizing the sources of non-value-added manufacturing time increases a firm’s responsiveness to its customers and reduces its costs. Answer: TRUE 3) Simple regression analysis estimates the relationship between […]

1) To comply with antitrust laws, a company must not engage in predatory pricing, dumping, or collusive pricing which lessen competition, put another company at a competitive disadvantage, or harm consumers. 2) Total factor productivity explicitly considers gains from using […]

1) Job-costing systems separate costs into cost categories according to when costs are introduced into the process of manufacture. 2) When large differences exist between practical capacity and master-budget capacity utilization, several companies classify the difference as production-volume variance. Answer: […]

1) ISO 9000 are standards designed to encourage organizations to develop environmental management systems to reduce environmental costs. 2) Companies that have low manufacturing lead time usually find that a version of backflush costing will report cost numbers totally different […]

1) Accounting methods for internal reporting purposes are specified by Generally Accepted Accounting Principles (GAAP). 2) A favorable flexible-budget variance for variable costs may be the result of using more input quantities than were budgeted. Answer: FALSE Explanation: An unfavorable […]

1) Throughput costing considers only direct materials and direct manufacturing labor to be truly variable costs. 2) Appraisal costs are costs incurred to preclude the production of products that do not conform to specifications. Answer: FALSE Explanation: Prevention costs are […]

1) Reverse engineering can be used to analyze competitors’ products to determine product designs and materials and to understand the technologies competitors use. 2) The dependent variable is a cost to be predicted and managed, whereas an independent variable or […]

1) One way to increase capacity is to reduce the time it takes for setups and processing. 2) Direct costs are traced the same way for actual costing and normal costing. Answer: TRUE 3) All inventory costs are available in […]

1) In a just-in-time production system, inventory carrying costs would be high. 2) Wood used to manufacture chairs is considered a direct variable cost. Answer: TRUE 3) An unfavorable price variance for materials-handling labor indicates that the actual cost per […]

1) One problem with total factor productivity revolves around the measurement of combined productivity of all inputs. 2) The t-value of a coefficient measures how large the value of the estimated coefficient is relative to its standard error. Answer: TRUE […]