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) credited to the Materials and In-Process Inventory Control account
B) debited to the Materials and In-Process Inventory Control account
C) debited to the Materials Inventory Control account
D) credited to the Materials Inventory Control account
3) Kaizen budgeting involves ________.
A) large cost reductions
B) management directed improvements
C) continual small cost reductions
D) continual small revenue increases
4) Companies should only produce and sell units as long as ________.
A) there is customer demand for the product
B) the competition allows it
C) the revenue from an additional unit exceeds the cost of producing it
D) there is a generous supply of low-cost direct materials
5) Dr. Charles Hunter, MD, performs a certain outpatient procedure for $1,000. His
fixed costs are $20,000, while his variable costs are $500 per procedure. Dr. Hunter
currently plans to perform 200 procedures this month.What is the breakeven point for
the month assuming that Dr. Hunter plans to perform the procedure 200 times?
A) 40 times
B) 30 times
C) 20 times
D) 10 times
6) ________ is the process of varying key estimates to identify those estimates that are
the most critical to a decision.
A) The graph method
B) A sensitivity analysis
C) The degree of operating leverage
D) Sales mix
7) Axelia Corporation has two divisions, Refining and Extraction. The company’s
primary product is Luboil Oil. Each division’s costs are provided below:
The Refining Division has been operating at a capacity of 40,000 barrels a day and
usually purchases 25,000 barrels of oil from the Extraction Division and 15,000 barrels
from other suppliers at $60 per barrel.
Assume 100,000 pounds are transferred from the Manufacturing Division to the
Distribution Division for a transfer price of $8.00 per pound. The Distribution Division
sells the 100,000 pounds at a price of $11.00 each to customers. What is the operating
income of both divisions together?
A) $200,000
B) $300,000
C) $400,000
D) $500,000
8) Vision Company manufactures digital cameras. For May, there were no beginning
inventories of direct materials and no beginning or ending work-in -process.
Conversion costs is the only indirect manufacturing cost category currently used.
Journal entries are recorded when materials are purchased and when units are sold.
Conversion costs – May$ 100,625
Direct materials purchased – May$253,575
Units produced – May80,500 units
Units sold – May77,500 units
Selling price$20 each
If the two trigger points are completion of good finished units of product and sale of
finished goods, which of the following entries would be used to record cost of finished
units completed under backflush costing?
A) Cost of Goods Sold $341,000
Inventory: Raw and In-Process $341,000
B) Cost of Goods Sold $341,000
Inventory Control $244,125
Conversion Costs Allocated $96,875
C) Inventory Inventory Control $244,125
Conversion Costs Allocated $96,875
Cost of Goods Sold $341,000
D) Cost of Goods Sold $354,200
Inventory: Raw and In-Process $253,575
Conversion Costs Allocated $96,875
9) Which of the following is the mathematical expression for calculating manufacturing
cycle efficiency(MCE)?
A) MCE = Manufacturing cycle time Value-added manufacturing time
B) MCE = Manufacturing time Value-added manufacturing time
C) MCE = Value-added manufacturing time Manufacturing cycle time
D) MCE = Value-added manufacturing time Manufacturing time
10) A purchasing manager’s performance is best evaluated using the ________.
A) direct materials price variance
B) direct materials flexible-budget variance
C) direct manufacturing labor flexible-budget variance
D) affect the manager’s action has on total costs for the entire company
11) Meridian Industries manufactures and sells two models of watches, Prime and
Luxuria. It expects to sell 3,000 units of Prime and 1,000 units of Luxuria in 2016.The
following estimates are given for 2016:
Meridian had an inventory of 200 units of Prime and 75 units of Luxuria at the end of
2015 . It has decided that as a measure to counter stock outages it will maintain ending
inventory of 350 units of Prime and 200 units of Luxuria.
Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of
$10. There were 100 units of Crimpson in stock at the end of 2015.The management
does not want to have any stock of Crimpson at the end of 2016 .
What is the total budgeted cost of sold for Meridian Industries in 2016?
A) $500,000
B) $600,000
C) $700,000
D) $800,000
12) Knowledge Transfer Associates is in the process of evaluating its new client
services for the business systems consulting division.
Server Planning, a new service, incurred $250,000 in development costs.
The direct costs of providing the service, which is all labor, averages $50 per hour.
Other costs for this service are estimated at $300,000 per year.
The current program for server planning is expected to last for two years. At that time,
expected new operating systems are likely to make the service non viable.
Customer service expenses average $250 per client, with each job lasting an average of
40 hours. The current staff expects to bill 15,000 hours for each of the two years the
program is in effect. Billing averages $90 per hour.
What is the estimated life-cycle operating income for the first year?
A) $206,250
B) $162,500
C) $(43,750)
D) $43,750
13) Strykerz Corp expects to spend $800,000 in 2015 in appraisal costs if it does not
change its incoming materials inspection method. If it decides to implement a new
receiving method, it will save $60,000 in fixed appraisal costs and variable costs of
$0.50 per unit of finished product. The new method involves $140,000 in training costs
and an additional $150,000 in annual equipment rental.
Internal failure costs average $160 per failed unit of finished goods. During 2014, 5%
of all completed items had to be reworked. External failure costs average $400 per
failed unit. The company’s average external failures are 1% of units sold. The company
carries no ending inventories, because all jobs are on a per order basis and a just-in-time
inventory ordering method is used.
What would be the change in the external failure budget, if 600,000 units are used and
assuming external failures are reduced by 10%.
A) $40,000 increase
B) $250,000 decrease
C) $240,000 decrease
D) $320,000 decrease