1) The revenues budget is prepared after all other operating budgets are prepared.
2) Indirect labor and distribution costs would most likely be in the same activity-cost
pool.
3) The Shapley value method of allocating common costs considers each party as first
the primary party and then the incremental party and computes an average allocation.
4) In multiproduct situations, when sales mix shifts toward the product with the lowest
contribution margin, the operating income will be lower.
5) The accrual accounting rate-of-return method is similar to the internal rate-of-return
method because both methods calculate a rate-of-return percentage.
6) Companies that want to calculate the full cost of products must allocate all corporate
costs to divisions.
7) The stand-alone method uses the product in the bundle with the most sale and then
uses this ranking to allocate bundled revenues to individual products.
8) Increasing the capacity of a bottleneck resource increases manufacturing cycle times
and delays.
9) Which of the following is true of staff management?
A) It plans income taxes, sales taxes, and international taxes.
B) It is directly responsible for achieving the goals of the organization.
C) It provides advice, support, and assistance to line management.
D) It controls the main business functions such as production and marketing.
10) The amount of time from when an order is ready to start on the production line to
when it becomes a finished good is referred to as ________.
A) manufacturing time
B) time driver
C) customer-response time
D) delivery time
11) The sales-quantity variance is calculated by ________.
A) deducting budgeted contribution margin based on actual units at actual mix from
budgeted contribution margin based on actual units sold at the actual mix
B) deducting budgeted contribution margin based on actual units at actual mix from
budgeted contribution margin based on actual units sold at the budgeted mix
C) deducting budgeted contribution margin based on budgeted units at actual mix from
budgeted contribution margin based on actual units sold at the budgeted mix
D) deducting budgeted contribution margin based on budgeted units at budgeted mix
from budgeted contribution margin based on actual units sold at the budgeted mix
12) A plant manufactures several different products. The wages of the plant supervisor
can be classified as a(n) ________.
A) direct cost
B) inventoriable cost
C) variable cost
D) period cost
13) When actual cost-allocations rates are used ________.
A) user divisions pay for costs that exceed budgeted amounts
B) managers of the supplier division are motivated to improve efficiency
C) user divisions are unaware of the allocated amounts until the end of the budget
period
D) managers know with certainty the rates to be used in that budget period
14) Tom’s Tire Tower, Inc., sells tires for $110. The unit variable cost per tire is $85.
Fixed costs total $475,000.
Required:
a.What is the contribution margin per tire?
b.What is the breakeven point in tires?
c.How many tires must be sold to earn a pretax income of $450,000?
d.What is the margin of safety, assuming 33,000 tires are sold?
15) Which of the following is a period cost?
A) sales promotion expenses
B) direct material cost
C) direct labor cost
D) indirect manufacturing costs like plant insurance
16) If advertising expense of $483,000 is allocated on the basis of sales, the cost per
cost driver rate would be ________.
A) $0.22 per dollar of sales
B) $0.23 per dollar of sales
C) $0.25 per dollar of sales
D) $0.24 per dollar of sales
17) Financial analysts use the projected cash flow statement to ________.
A) determine the tax effect of cash expenses
B) plan for short-term cash investments
C) analyze the impact of non-cash expense on income statement
D) project depreciation expense
18) Waldorf Company has two sources of funds: long-term debt with a market and book
value of $5 million issued at an interest rate of 12%, and equity capital that has a
market value of $4 million (book value of $2 million). Waldorf Company has profit
centers in the following locations with the following operating incomes, total assets,
and current liabilities. The cost of equity capital is 12%, while the tax rate is 25%.
What is the for Cedar Rapids?
A) $67,790
B) $110,000
C) $117,000
D) $152,500
19) Short-term pricing decisions ________.
A) use costs that may be irrelevant for long-term pricing decisions
B) are more opportunistic
C) tend to decrease prices when demand is strong
D) have a time horizon of more than one year
20) Deocomfort Corporation manufactured 55,500 door jambs during September. The
following fixed overhead data relates to September:
What is the amount of fixed overhead allocated to production?
A) $51,060
B) $50,500
C) $50,600
D) $55,500
21) Craylon Corp has two service departments, S1 and S2, and two production
departments, P1 and P2.
The data for April were as follows:
Required:
a.Set up algebraic equations in linear form for each activity.
b.Determine total costs for each department by solving the equations from part (a) using
the reciprocal method.
22) Gregory Company has identified three cost pools to allocate overhead costs. The
following estimates are provided for the coming year:
The accounting records show the Mossman Job consumed the following resources:
If direct labor-hours are considered the only overhead cost driver, what is the single cost
driver rate for Gregory?
A) $1.33 per direct labor-hour
B) $0.80 per direct labor-hour
C) $0.75 per direct labor-hour
D) $1.25 per direct labor-hour
23) Mynarc Corporation produces fertilizer and distributes the product by using his
tanker trucks. Mynarc
uses budgeted fleet hours to allocate variable manufacturing overhead. The following
information pertains to the company’s manufacturing overhead data:
What is the flexible-budget variance for variable manufacturing overhead?
A) $4,860 favorable
B) $4,860 unfavorable
C) $630 favorable
D) $630 unfavorable
24) Why do we need to accumulate and calculate unit costs in process costing (and also
job costing)?
25) The Pitt Corporation has been outsourcing data processing in the belief that such
outsourcing would reduce costs and increase corporate profitability. In spite of this,
there has been no meaningful increase in corporate profitability.
Previously, Pitt used a single-rate method to allocate data processing costs. A per unit
cost for data processing was computed and compared to the price of the outside
supplier. The price of the outside supplier was lower and thus, the outside bid was
accepted.
Required:
Formulate a possible reason why Pitt’s profitability has not shown improvement in
terms of the cost allocation method used.
26) What are the five steps that are followed while implementing target pricing and
target costing?
27) Claudia Geer, controller, discusses the pricing of a new product with the sales
manager, James Nolan. What major influences must Claudia and James consider in
pricing the new product? Discuss each briefly.
28) Companies are increasingly using nonfinancial measures to evaluate performance.
Why? Since these numbers do not come from the company’s financial records, why are
they used?
29) List and describe the five steps in process costing.