Quality inspection points should
a. precede bottlenecks.
b. follow bottlenecks.
c. be placed at the end of all production processes.
d. be placed at random points in the manufacturing process.
For financial reporting to the IRS and other external users, manufacturing overhead
costs are
a. deducted in the period that they are incurred.
b. inventoried until the related products are sold.
c. treated like period costs.
d. inventoried until the related products have been completed.
Information concerning Lynch Corporation’s Product A follows:
Assuming that Lynch increased sales of Product A by 25 percent, what should the profit
from Product A be?
a. $ 50,000
b. $ 62,500
c. $ 75,000
d. $170,000
Texoma Trucking Company is exploring different prediction models that can be used to
forecast indirect labor costs. One independent variable under consideration is machine
hours. Following are matching observations on indirect labor costs and machine hours
for the past six months:
In a high-low model, which months’ observations would be used to compute the model’s
parameters?
a. 2 and 5
b. 1 and 6
c. 2 and 6
d. 4 and 5
Mansfield Company uses a weighted average process costing system. Material is added
at the start of production. Mansfield Company started 14,000 units into production and
had 5,000 units in process at the start of the period that were 75 percent complete as to
conversion costs. If Mansfield Company transferred out 12,250 units, how many units
were in ending Work in Process Inventory?
a. 1,750
b. 3,000
c. 5,500
d. 6,750
For its most recent fiscal year, a firm reported that its contribution margin was equal to
40 percent of sales and that its net income amounted to 10 percent of sales. If its fixed
costs for the year were $60,000, how much were sales?
a. $150,000
b. $200,000
c. $600,000
d. can’t be determined from the information given
Which of the following statements is true?
a. All organizations have the same set of budgets.
b. All organizations are required to budget.
c. Budgets are a quantitative expression of an organization’s goals and objectives.
d. Budgets should never be used to evaluate performance.
Industrial Solutions Company
Industrial Solutions Company manufactures a cleaning solvent. The company employs
both skilled and unskilled workers. To produce one 55-gallon drum of solvent requires
Materials A and B as well as skilled labor and unskilled labor. The standard and actual
material and labor information is presented below:
Standard:
Material A: 30.25 gallons @ $1.25 per gallon
Material B: 24.75 gallons @ $2.00 per gallon
Skilled Labor: 4 hours @ $12 per hour
Unskilled Labor: 2 hours @ $ 7 per hour
Actual:
Material A: 10,716 gallons purchased and used @ $1.50 per gallon
Material B: 17,484 gallons purchased and used @ $1.90 per gallon
Skilled labor hours: 1,950 @ $11.90 per hour
Unskilled labor hours: 1,300 @ $7.15 per hour
During the current month Industrial Solutions Company manufactured 500 55-gallon
drums.
Round all answers to the nearest whole dollar.
Refer to Industrial Solutions Company. What is the labor yield variance?
a. $2,583 U
b. $2,583 F
c. $1,138 F
d. $1,138 U
The combined weighted average interest rate that a firm incurs on its long-term debt,
preferred stock, and common stock is the
a. cost of capital.
b. discount rate.
c. cutoff rate.
d. internal rate of return.
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 machine maintenance cost allocated to LCD TVs would
be:
a. $51,923
b. $55,385
c. $69,231
d. $72,000
Machine Master, Inc. had the following data regarding monthly power costs:
Assume that management expects 500 machine hours in May. Using the high-low
method, calculate May’s power cost using machine hours as the basis for prediction.
a. $700
b. $705
c. $710
d. $1,320
Riley Company
Riley Company produces two products from a joint process: A and C. Joint processing
costs for this production cycle are $9,000.
If A and C are processed further, no disposal costs will be incurred or such costs will be
borne by the buyer.
Refer to Riley Company. Using a physical measure, what amount of joint processing
cost is allocated to Product A (round to the nearest dollar)?
a. $2,938
b. $3,682
c. $4,500
d. $5,318
Which service department cost allocation method considers all interrelationships of the
departments and reflects these relationships in equations?
a. step method
b. indirect method
c. algebraic method
d. direct method
Phoenix Corporation
The records of Phoenix Corporation revealed the following data for the current year.
Refer to Phoenix Corporation. Assume that Phoenix has underapplied overhead of
$10,000 and that this amount is immaterial. What is the balance in Cost of Goods Sold
after the underapplied overhead is closed?
a. $133,650
b. $123,650
c. $143,650
d. $137,803
A unit that is rejected at a quality control inspection point, but that can be reworked and
sold, is referred to as a
a. spoiled unit.
b. scrap unit.
c. abnormal unit.
d. defective unit.
Clooney Company has the following expected pattern of collections on credit sales: 70
percent collected in the month of sale, 15 percent in the month after the month of sale,
and 14 percent in the second month after the month of sale. The remaining 1 percent is
never collected.
At the end of May, Clooney Company has the following accounts receivable balances:
Clooney’s expected sales for June are $150,000. How much cash will Clooney
Company expect to collect in June?
a. $127,400
b. $129,000
c. $148,600
d. $152,520
Magnificent Motor Corporation
The Engine Division of Magnificent Motor Corporation uses 5,000 carburetors per
month in its production of automotive engines. It presently buys all of the carburetors it
needs from two outside suppliers at an average cost of $100. The Carburetor Division
of Magnificent Motor Corporation manufactures the exact type of carburetor that the
Engine Division requires. The Carburetor Division is presently operating at its capacity
of 15,000 units per month and sells all of its output to a foreign car manufacturer at
$106 per unit. Its cost structure (on 15,000 units) is:
Assume that the Carburetor Division would not incur any variable selling costs on units
that are transferred internally.
Refer to Magnificent Motor Corporation. What is the maximum of the transfer price
range for a transfer between the two divisions?
a. $106
b. $100
c. $90
d. $70
Process costing is used in companies that
a. engage in road and bridge construction.
b. produce sailboats made to customer specifications.
c. produce bricks for sale to the public.
d. construct houses according to customer plans.
Smith Corporation
Smith Corporation has two service departments: Data Processing and Personnel. Data
Processing provides more service than does Personnel. Smith Corporation also has two
production departments: A and B. Data Processing costs are allocated on the basis of
assets used while Personnel costs are allocated based on the number of employees.
Refer to Smith Corporation. Using the direct method, what amount of Personnel costs is
allocated to B (round to the nearest dollar)?
a. $123,750
b. $206,250
c. $112,500
d. $187,500
Which of the following must be known about a production process in order to institute a
variable costing system?
a. the variable and fixed components of all costs related to production
b. the controllable and non-controllable components of all costs related to production
c. standard production rates and times for all elements of production
d. contribution margin and break-even point for all goods in production
Buckingham Company
Buckingham Company uses a standard cost system for its production process and
applies overhead based on direct labor hours. The following information is available for
May when Buckingham produced 4,500 units:
Refer to Buckingham Company. Using the one-variance approach, what is the total
overhead variance?
a. $6,062 U
b. $3,625 U
c. $9,687 U
d. $6,562 U
Becker Company makes fabric-covered storage totes. The company began July with
600 totes in process that were 100 percent complete as to cardboard, 75 percent
complete as to cloth, and 65 percent complete as to conversion costs. During the month,
3,600 totes were started. On April 30, 450 totes were in process (100 percent complete
as to cardboard, 60 percent complete as to cloth, and 50 percent complete as to
conversion costs). Using the FIFO method, what are equivalent units for cloth?
a. 3,570
b. 3,750
c. 3,870
d. 4,020
Which of the following has sales value?
a. no no
b. yes no
c. yes yes
d. no yes
Which of the following statements is false?
a. While the use of standard costing is acceptable for job-order costing systems, actual
cost records should still be maintained.
b. It is normally more time-consuming for a company to use standard costs in a
job-order costing system.
c. Standards can be used in a job-order costing system, if the company usually produces
items that are similar in nature.
d. Standard costs may be used for material, labor, or both material and labor in a
job-order costing environment.
Hunnicutt Company is a construction company that builds greenhouses on special
request. What is the proper classification of indirect material used?
a. no no
no
b. no yes
yes
c. yes yes
yes
d. yes no
no
EMS has to do with handling
a. pollution.
b. manufacturing.
c. scrap.
d. by-products.
Variance analysis for overhead normally focuses on
a. efficiency variances for machinery and indirect production costs.
b. volume variances for fixed overhead costs.
c. the controllable variance as a lump-sum amount.
d. the difference between budgeted and applied variable overhead.
The time value of money is considered in long-range investment decisions by
a. assuming equal annual cash flow patterns.
b. investing only in short-term projects.
c. assigning greater value to more immediate cash flows.
d. ignoring depreciation and tax implications of the investment.
Data mining is used to
a. uncover quality problems.
b. study customer retention.
c. identify cost drivers.
d. all of the above.
Andersen Corporation
Andersen Corporation has the following information for the current month:
All materials are added at the start of the production process. Andersen Corporation
inspects goods at 75 percent completion as to conversion.
Refer to Andersen Corporation. Assume that the costs per EUP for material and
conversion are $2.00 and $2.25, respectively. Assuming that weighted average is used,
what is the cost assigned to ending inventory?
a. $55,312
b. $63,750
c. $66,375
d. $72,312
The difference between total actual cost incurred and total standard cost applied is
referred to as _________________________.
When using a market-based transfer price, a decision must be made which market price
to use.
What are the limitations of the payback period as a capital budgeting technique?
Market based transfer prices are most appropriate for customized high-volume and
high-cost services.
Whitmore Corporation
Whitmore Corporation predicts it will produce and sell 40,000 units of its sole product
in the current year. At that level of volume, it projects a sales price of $30 per unit, a
contribution margin ratio of 40 percent, and fixed costs of $5 per unit.
Refer to Whitmore Corporation. What is the company’s projected breakeven point in
dollars and units?
Outcomes that have resulted from past actions are also referred to as
____________________ indicators.
A management philosophy that allows all workers access to information necessary to do
their jobs effectively is referred to as ________________________________________.
When considering risk, a manager will often use a judgmental method of risk
adjustment.
A predictor which has an absolute cause and effect relationship to a cost is referred to a
cost driver.
The costing technique that treats all manufacturing costs as inventoriable is referred to
as _________________ or ___________ costing.
On a CVP graph, the total fixed cost line parallels the x-axis.
Discuss standard costing as used in conjunction with process costing.
Decentralization increases the time required for decision-making.
The excess of budgeted or actual sales over sales at break-even point is referred to as
______________________________.
An organization’s values statement identifies fundamental beliefs about what is
important to the organization.
Distinguish between lead indicators and lag indicators, and provide an example of each.
Which of these indicators is a better guide for strategic planning?
Two methods of allocating joint costs to individual products are
________________________________________ and
________________________________________.
Operational management should be directly involved with the strategic planning of an
organization.