Archives: Quiz

1) All other things being equal, the longer the time horizon the more likely a cost will be fixed. 2) The full cost plus a markup transfer-pricing method can sometimes lead to goal incongruence. Answer: TRUE 3) The cost used […]

1) A company with sales of $50,000, variable costs of $35,000, and fixed costs of $25,000 will earn a net income of $15,000. 2) A cost object is anything for which a measurement of costs is desired. Answer: TRUE 3) […]

1) A responsibility center is a part, segment, or subunit of an organization whose manager is accountable for a specified set of activities. 2) Operating plans are generally expressed through long-run budgets. Answer: FALSE Explanation: Operating plans are generally expressed […]

1) At the end of the fiscal year, the fixed overhead spending variance is always prorated among work-in-process control, finished goods control, and cost of goods sold on the basis of the fixed overhead allocated to these accounts. 2) Kaizen […]

1) A positive aspect of backflush costing is the presence of the visible audit trail. 2) The credit rating agencies require detailed disclosures of the compensation arrangements of top-level executives. Answer: FALSE Explanation: The SEC requires detailed disclosures of the […]

1) The high-low method uses cost and activity data from just two periods to establish the formula for a mixed cost. 2) Direct costs of a cost object are costs related to a particular cost object that can be allocated […]

1) Benchmarking measures how well a company and its managers are doing in comparison to other organizations. 2) A Pareto diagram is usually in a bar-chart format, that indicates how frequently each type of defect occurs, ordered from the most […]

1) Indirect manufacturing costs should be allocated equally to each job. 2) Kaizen budgeting does NOT make sense for cost centers. Answer: FALSE Explanation: Kaizen budgeting can be used in any type of responsibility center. 3) Engineered costs result from […]

1) Costs of activities related to a group of units sold to a customer is termed as customer batch-level costs. 2) The revenues budget should be based on the cost of goods sold budget. Answer: FALSE Explanation: The revenues budget […]

1) Fox Studios, the movie production house, uses process costing to estimate costs. 2) Merchandising companies hold only one type of inventory: direct material. Answer: FALSE Explanation: Merchandising companies normally hold only one type of inventory: merchandise inventory. 3) Management […]

1) Companies that only record the invoice price can usually track the magnitude of price discounting. 2) Economic value added, unlike residual income, charges managers for the costs of their investments in long-term assets and working capital. Answer: FALSE Explanation: […]

1) The best-designed strategies are valuable whether or not they are effectively implemented. 2) The high-low method involves choosing the period of highest cost driver activity and the period of lowest cost driver activity. Answer: TRUE 3) Historical-cost-based accounting measures […]

1) Transfer-pricing systems enable managers to focus on maximizing the performance of their subunits. 2) Managers can always view a favorable variable overhead spending variance as desirable. Answer: FALSE Explanation: Managers should not always view a favorable variable overhead spending […]

1) Longer manufacturing cycle times increase the inventory carrying costs and decrease revenues. 2) The DuPont method recognizes the two basic ingredients in profit making: increasing the income per dollar of revenues and using assets to generate more revenues. Answer: […]

1) Effort refers to physical exertion, such as a worker producing at a faster rate, but excludes non-physical aspects like acumen and diligence of a worker. 2) The cash budget is a schedule of expected cash receipts and disbursements. Answer: […]

1) The formal management control system includes shared values, loyalties, and mutual commitments among members of the company, company culture, and norms about acceptable behavior for managers and other employees. 2) Reducing the investment base involves decreasing idle cash, managing […]

1) A revenue driver is a variable, such as volume, that causally affects revenues. 2) Machine depreciation can be a cost-driver for a manufacturing company under ABC system. Answer: FALSE Explanation: Machine depreciation is an activity cost rather than a […]

1) In joint costing, outputs with no sales value are always excluded when costs are allocated using physical measures. 2) A capital budgeting project is accepted if the required rate of return equals or exceeds the internal rate of return. […]

1) Investing in a new equipment, such as flexible manufacturing systems that can be programmed to switch quickly from producing one product to producing another can decrease capacity as it would incur excess overhead costs. 2) Companies seek to minimize […]

1) In joint costing, using physical measures at splitoff to allocate costs enables the accountant to obtain individual product costs and gross margins. 2) To reduce the undesirable incentives to build up inventories that absorption costing can create, a number […]

1) Bar charts and a whale curve are some of the common ways of displaying the results of customer-profitability analysis. 2) Financial accounting information focuses on internal reporting. Answer: FALSE Explanation: Management accounting information focuses on internal reporting and financial […]

1) Some companies present financial and nonfinancial performance measures for various organization units in a single report called the balanced scorecard. 2) If indirect-cost rates were based on actual short-term usage, periods of lower demand would result in lower costs […]

1) Customer life-cycle costs focus on the total costs incurred by a customer to acquire, use, maintain, and dispose of a product or service. 2) Inflation and fluctuations in foreign-currency exchange rates affect performance measurement. Answer: TRUE 3) The actual […]

1) The journal entry to dispose of the difference between actual conversion costs incurred and standard conversion costs allocated is different under backflush costing and sequential tracking. 2) A direct cost is a cost that cannot be easily traced to […]

1) Under both variable and absorption costing, research and development costs are period costs. 2) Actual prices paid for materials usually serve as actual direct-cost rates for charging material costs to jobs. Answer: TRUE 3) Backflush costing is a costing […]

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. Answer: FALSE Explanation: Companies that implement […]

1) In joint costing, the constant gross-margin percentage method recognizes that the profit margin is not just attributable to the joint process but is also derived from the costs incurred after splitoff. 2) Computer-based systems, such as ERP systems, cannot […]

1) A flexible-budget variance pertaining to revenues is often called a sales-volume variance. 2) Time taken to replace or repair defective products is a measure of the financial perspective of the balanced scorecard. Answer: FALSE Explanation: Time taken to replace […]

1) Cost bases that include fewer costs also have lower markups. 2) If U.S dollar strengthens against the Japanese Yen, Japanese producers selling goods in U.S markets will have to increase the prices of products to recover the extra cost […]

1) Bateman Corporation, which has only one product, has provided the following data concerning its most recent month of operations: What is the unit product cost for the month under variable costing? A.$89 per unit B.$97 per unit C.$108 per […]

1) The internal rate of return on the investment is closest to: A.23% B.25% C.24% D.21% 2) Duckhorn Housecleaning provides housecleaning services to its clients. The company uses an activity-based costing system for its overhead costs. The company has provided […]

1) Up to how much should the company be willing to pay for one additional minute of milling machine time if the company has made the best use of the existing milling machine capacity? (Round your answer to the nearest […]

1) Eliezrie Corporation makes a product with the following standard costs: In January the company’s budgeted production was 7,400 units but the actual production was 7,500 units. The company used 45,580 kilos of the direct material and 2,030 direct labor-hours […]

1) The following information relates to next year’s projected operating results of the Consumer Division of Xampa Corporation: If the Consumer Division is eliminated, $1,600,000 of the above fixed expenses could be avoided. What will be the effect on Xampa’s […]

1) Delta Railroad has two operating divisions–Freight and Passenger. The Maintenance Department serves both divisions. Variable Maintenance Department costs are budgeted at $12 per thousand miles. The fixed Maintenance Department costs are budgeted at $800,000 per year. The level of […]

1) Smallwood Corporation has provided the following data concerning manufacturing overhead for January: The Corporation’s Cost of Goods Sold was $223,000 prior to closing out its Manufacturing Overhead account. The Corporation closes out its Manufacturing Overhead account to Cost of […]

1) Evita Corporation prepares its statement of cash flows using the indirect method. Evita’s statement showed “Net cash provided by operating activities” of $46,000. Under the direct method, this number would have been: A.$0. B.$46,000. C.greater than $46,000. D.less than […]

1) Tysor Framing’s cost formula for its supplies cost is $2,610 per month plus $17 per frame. For the month of July, the company planned for activity of 710 frames, but the actual level of activity was 712 frames. The […]

1) If the company bases its predetermined overhead rate on the estimated amount of the allocation base for the upcoming year, by how much was manufacturing overhead underapplied or overapplied? The management of Richbourg Corporation would like to investigate the […]

1) Accounts receivable turnover will normally decrease as a result of: A.the write-off of an uncollectible account against the allowance for bad debts. B.a significant sales volume decrease near the end of the accounting period. C.an increase in cash sales […]

1) Setting up a machine to change from producing one product to another is an example of a: A.Unit-level activity. B.Batch-level activity. C.Product-level activity. D.Organization-sustaining activity. 2) Hasty Hardwood Floors installs oak and other hardwood floors in homes and businesses. […]

1) The net cash provided by (used in) financing activities for the year was: A.$(18) B.$5 C.$(5) D.$8 Answer: C Financial statements of Rukavina Corporation follow: Cash dividends were $8. The company did not dispose of any property, plant, and […]

1) The company’s acid-test (quick) ratio at the end of Year 2 is closest to: A.1.96 B.1.41 C.1.20 D.1.48 Answer: B Acid-test (quick) ratio = Quick assets* Current liabilities = $424,000 $301,000 = 1.41 (rounded) *Quick assets = Cash + […]

1) Which product makes the LEAST profitable use of the milling machines? A.Product A B.Product B C.Product C D.Product D 2) Glassing Clinic uses client-visits as its measure of activity. During September, the clinic budgeted for 3,700 client-visits, but its […]

1) Barker Corporation uses the weighted-average method in its process costing system. This month, the beginning inventory in the first processing department consisted of 300 units. The costs and percentage completion of these units in beginning inventory were: A total […]

1) Alden Company recorded the following transactions for the just completed month. The company had no beginning inventories. (a) $72,000 in raw materials were purchased for cash. (b) $67,000 in raw materials were requisitioned for use in production. Of this […]

1) The net present value of the proposed project is closest to: A.$154,663 B.$322,000 C.$117,796 D.$245,246 ( The Sawyer Corporation has $80,000 to invest and is considering two different projects, X and Y. The following data are available on the […]

1) Product Q77H has been considered a drag on profits at Zenke Corporation for some time and management is considering discontinuing the product altogether. Data from the company’s accounting system appear below: In the company’s accounting system all fixed expenses […]

1) A static planning budget is: A.a budget for a single level of activity. B.a budget that ignores inflation. C.used only for fixed costs. D.used when the mix of products does not change. 2) The working capital at the end […]

1) The current ratio at the end of Year 2 is closest to: A.0.38 B.2.17 C.0.94 D.0.40 2) The following costs were incurred in April: Prime costs during the month totaled: A) $53,000 B) $67,000 C) $38,000 D) $103,000 Answer: […]