Information that is related to past events is relevant in the decision-making process.
In a normal cost system, factory overhead is applied to Work in Process using a
predetermined overhead rate.
On a CVP graph, the total fixed cost line parallels the x-axis.
Discrete production losses are assumed to occur throughout the process.
The point of purchase model calculates the materials price variance using the quantity
of materials used in production.
Unit level costs occur once for each unit produced.
In a normal cost system, factory overhead is assigned to an overhead control account
and then allocated to products and services.
Machine setup is normally considered a unit-level cost
If overapplied factory overhead is immaterial, the account is closed by a debit to Cost
of Goods Sold.
There is typically an inverse relationship between prevention costs and failure costs.
A fixed overhead volume variance is a noncontrollable variance.
When a flexible manufacturing system (FMS) is used, response time to needs of the
market is slower than under a traditional manufacturing system.
An administrative department provides services that benefit other internal units of an
organization.
Sterling Vision Corporation
Sterling Vision Corporation manufactures various glass products including a car
window. The setup cost to produce the car window is $1,200. The cost to carry a
window in inventory is $3 per year. Annual demand for the car window is 12,000 units.
Refer to Sterling Vision Corporation. If the annual demand for the car window was to
increase to 15,000 units,
A. the number of setups would decrease.
B. the total carrying costs would increase.
C. the economic order quantity would decline.
D. all of the above would occur.
Which service department cost allocation method utilizes a “benefits-provided”
ranking?
A. algebraic method
B. indirect method
C. step method
D. direct method
With JIT manufacturing, which of the following costs would be considered an indirect
product cost?
A. cost of specific-purpose equipment
B. cost of equipment maintenance
C. property taxes on the plant
D. salary of a manufacturing cell worker
Wimberley Company
Wimberley Company has the following information available for December when 3,500
units were produced (round answers to the nearest dollar).
Refer to Wimberley Company. Assume that the company computes the material price
variance on the basis of material issued to production. What is the total material
variance?
A. $2,850 U
B. $2,850 F
C. $5,188 U
D. $5,188 F
The minimum potential transfer price is determined by
A. incremental costs in the selling division.
B. the lowest outside price for the good.
C. the extent of idle capacity in the buying division.
D. negotiations between the buying and selling division.
Putnam Company
Below is an income statement for Putnam Company:
Refer to Putnam Company. What is Putnam’s degree of operating leverage?
A. 1.33
B. 2.00
C. 3.00
D. 4.00
For purposes of allocating joint costs to joint products using the relative sales value at
split-off method, the costs beyond split-off
A. are allocated in the same manner as the joint costs.
B. are deducted from the relative sales value at split-off.
C. are deducted from the sales value at the point of sale.
D. do not affect the allocation of the joint costs.
In analyzing manufacturing overhead variances, the volume variance is the difference
between the
A. amount shown in the flexible budget and the amount shown in the debit side of the
overhead control account.
B. predetermined overhead application rate and the flexible budget application rate
times actual hours worked.
C. budget allowance based on standard hours allowed for actual production for the
period and the amount budgeted to be applied during the period.
D. actual amount spent for overhead items during the period and the overhead amount
applied to production during the period.
The sum of the labor mix and labor yield variances equals
A. the labor efficiency variance.
B. the total labor variance.
C. the labor rate variance.
D. nothing because these two variances cannot be added since they use different costs.
Ultimate Vision Corporation
Ultimate Vision Corporation has two product lines: LCD televisions and projection
televisions. The company has budgeted the following production and overhead costs for
the upcoming year:
Refer to Ultimate Vision Corporation. If the company uses number of units produced to
allocate factory overhead, the materials handing cost allocated to projection TVs would
be:
A. $35,000
B. $45,000
C. $46,875
D. $51,923
Which of the following formulas is the best representation of the concept of target
costing?
A. target cost + profit margin = selling price
B. selling price – target cost = profit margin
C. selling price – profit margin = target cost
D. target cost – standard cost = profit margin
A cost management system should provide the means to develop
A. the most accurate product or service costs.
B. a reasonably accurate product or service cost given cost-benefit considerations.
C. a product or service cost that does not include any non-value-added overhead.
D. a costing system that traces all costs directly to individual products or services.
Williams Company
Williams Company has a job-order costing system and an overhead application rate of
120 percent of direct labor cost. Job #63 is charged with direct material of $12,000 and
overhead of $7,200. Job #64 has direct material of $2,000 and direct labor of $9,000.
Refer to Williams Company. What is the total cost of Job #64?
A. $10,800
B. $11,000
C. $21,800
D. $30,200
Which of the following factors should not be considered when deciding whether to
investigate a variance?
A. magnitude of the variance
B. trend of the variances over time
C. likelihood that an investigation will reduce or eliminate future occurrences of the
variance
D. whether the variance is favorable or unfavorable
The master budget
A. reflects the determination of an organization’s cost of capital.
B. serves as a managerial tool for the organization.
C. includes only an organization’s pro forma financial statements.
D. utilizes only information from the financial accounting system.
Bradley Corporation
Bradley Corporation has three production departments A, B, and C. Bradley
Corporation also has two service departments, Administration and Personnel.
Administration costs are allocated based on value of assets employed, and Personnel
costs are allocated based on number of employees. Assume that Administration
provides more service to the other departments than does the Personnel Department.
Refer to Bradley Corporation. Assume that Administration costs have been allocated
and the balance in Personnel is $860,000. What amount is allocated to B (round to the
nearest dollar)?
A. $213,964
B. $430,000
C. $106,982
D. $143,333
Taylor Corporation
Taylor Corporation manufactures and sells baseball bats. For a recent period, its
production and sales objectives were each set at 20,000 units. Also, for this period the
firm had estimated costs as follows:
Refer to Taylor Corporation. Note that the budget for discretionary fixed costs is
$40,000. If actual discretionary fixed costs were $50,000, could cost control have still
been effective? Explain.
What are the advantages and disadvantages of decentralization within an organization?
The advantages of decentralization are:
1> It helps top management recognize and develop managerial talent.
2> It allows managerial performance to be comparatively evaluated.
3> It can often lead to greater job satisfaction and provides job enrichment.
4> It makes the accomplishment of organizational goals and objectives easier.
5> It reduces decision-making time.
6> It allows the use of management by exception.
The difference between budgeted and applied fixed factory overhead is referred to as a
__________________________________________________.
The actual time taken to perform all necessary manufacturing functions in a process is
referred to as _________________________.
A judgment regarding which assets an entity should acquire to achieve its stated
objectives is considered to be a(n) _______________________ decision.
A performance measure that assumes all production factors are operating perfectly is
referred to as ____________________ capacity.
Identify the steps to follow in establishing the performance reward system for a
company.
