Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
For short-run product-mix decisions, maximizing contribution margin will also result in
maximizing operating income.
A "push-through" system, often described as a materials requirement planning system,
focuses first on the forecasted amount and timing of finished goods and then determines
the demand for materials components and subassemblies at each of the prior stages of
production.
In joint costing, the constant gross-margin percentage NRV method is an example of
allocating costs using physical measures.
The difference between total revenues and total variable costs is called profit margin.
Past costs themselves are always irrelevant when making decisions.
The benefit of engaging lower level management in the budget preparation process is
that it helps to streamline the budget process.
One advantage of using standard times to develop a budget is they are simple to
compile, are based solely on the past actual history, and do not require expected future
changes to be taken into account.
A company's strategy specifies how an organization matches its capabilities with the
opportunities in the marketplace.
Under the FIFO method, all spoilage costs are assumed to be related to the units
completed during this period using the unit costs of the current period.
Engineered costs result from a cause-and-effect relationship between the cost driver
output and the resources used to produce that output.
A variance is the difference between the actual cost for the current and expected (or
budgeted) performance.
Cost objects may be jobs, products, or customers.
The only difference between the static budget and flexible budget is that the static
budget is prepared using actual prices charged and costs per units incurred.
A loss on the disposal of a replacement asset is an irrelevant fact when estimating
relevant cash flows of a capital asset decision.
Markups tend to be higher in more competitive markets.
If activity based cost accounting is used to allocate capacity related costs, normal
capacity measures should be used.
In joint costing, outputs with no sales value are always excluded when costs are
allocated using physical measures.
All costs incurred by a company (sacrifice of a resource) are recorded in the accounting
system.
Cost allocation data could be a valuable input to encourage design of products that are
simpler to manufacture and less costly to service.
As budgeting is not a cross-functional activity, it tends to be accurate and reliable with
regard to forecasts.
In most multiproduct situations when sales mix shifts toward the product with the
highest contribution margin, operating income will be higher.
In the analysis of strategy maps, strong ties are those causal links where the impact of
one strategic objective on realization of another is average when compared to the
strength of the other ties in the map.
If Six Sigma's goal is to get defect rates down to 3.4 defects per every 100,000 units
produced.
Successful re-engineering efforts generally involve changing the roles and
responsibilities of employees.
Allocating common costs can best be achieved by using the stand-alone cost-allocation
method.
Normal spoilage is usually regarded as avoidable and controllable.
The Institute of Management Accountants provides a hotline to discuss ethical issues.
Customer-sustaining costs is the costs of activities to support individual customers,
regardless of the number of units or batches of product delivered to the customer.
Indirect manufacturing costs such as rent, factory supervisor salary, and depreciation on
production equipment are always costs of the period in which they are
incurred and are not associated with inventories.
Companies that only record the invoice price can usually track the magnitude of price
discounting.
A unit cost is also called an average cost.
When evaluating alternatives to improve quality, both the relevant benefits as well as
the relevant costs should be considered.
Spoilage can be considered either normal or abnormal.
Management by exception is the practice of concentrating on areas not operating as
anticipated (such as a cost overrun) and placing less attention on areas operating as
anticipated.
A packaging department is most likely a profit center.
Cost accounting measures and reports short-term, long-term, financial, and non
financial information.
The transfer price creates revenues for the selling subunit and costs for the buying
subunit affecting each subunit's operating income.
In a just-in-time system, suppliers are selected primarily on the basis of their ability to
provide materials and products at the lowest possible price.
The sales-quantity variance will be favorable when which of the following occurs?
A) sales-volume variance and flexible-budget variance are favorable
B) actual units of all products sold exceed budgeted units of all products sold
C) the actual sales mix shifts towards the more profitable units
D) static-budget variance and flexible-budget variance are favorable
The following information pertains to Monroe Company:
∙ Cash is collected from customers in the following manner:
Month of sale 35%
Month following the sale 65%
∙ 40% of purchases are paid for in cash in the month of purchase, and the balance is paid
the following month.
∙ Labor costs are 30% of sales. Other operating costs are $38,000 per month (including
$8,000 of depreciation). Both of these are paid in the month incurred.
∙ The cash balance on March 1 is $8,000. A minimum cash balance of $6,000 is required at
the end of the month. Money can be borrowed in multiples of $1,000.
How much cash will be paid to suppliers in March?
A) $46,400
B) $56,000
C) $96,000
D) $102,400
Alfred, owner of Hi-Tech Fiberglass Fabricators, Inc., is interested in using the
reciprocal allocation method. The following data from operations were collected for
analysis:
Services furnished:
Which of the following linear equations represents the complete reciprocated cost of the
Data Processing Department?
A) DP= $70,000 + (700 / 4850) PM
B) DP= $70,000 + (3900/ 17,100) PM
C) DP= $70,000 × (700 / 4850) + $370,000 × (3900 / 17,100)
D) DP= $370,000 + (700 / 17,100) DP
Midize Flower Company provides flowers and other nursery products for decorative
purposes in medium to large sized restaurants and businesses. The company has been
investigating the purchase of a new specially equipped van for deliveries. The van will
cost $61,392 with a eight-year life. The expected additional cash inflows are $16,000
per year. What is the internal rate of return?
A) 17%
B) 20%
C) 22%
D) 27%
An advantage of nonfinancial measures of quality include that they ________.
A) focus managers' attention on how poor quality affects operating income
B) assist in problem solving by comparing costs and benefits of different
quality-improvement programs and by setting priorities for cost reduction
C) are useful indicators of future long-run performance
D) use certain statistical measures to justify their data
For fixed manufacturing overhead, there is no ________.
A) spending variance
B) efficiency variance
C) flexible-budget variance
D) production-volume variance
M & G TV and Appliance Store is a small company that has hired you to perform some
management advisory services. The following information pertains to 2017 operations.
Sales (2,000 televisions) $2,000,000
Cost of goods sold 570,000
Store manager's salary per year 130,000
Operating costs per year 280,000
Advertising and promotion per year 32,000
Commissions (2.3% of sales) 46,000
What are the estimated total costs if the company expects to sell 3,300 units next year?
A) $1,458,400
B) $2,803,700
C) $2,361,700
D) $517,900
A company's actual performance should be compared against budgeted amounts for the
same accounting period so that ________.
A) adjustments for future conditions can be included
B) to avoid any feedback from the budgets due to past miscues
C) inefficiencies of the past year can be included
D) a rolling budget can be implemented
Extreme Manufacturing Company provides the following ABC costing information:
The above activities are used by Departments A and B as follows:
How much of the total costs will be assigned to Department B?
A) $282,460
B) $246,925
C) $239,425
D) $256,825
The account analysis method estimates cost functions ________.
A) by classifying cost accounts as variable, fixed, or mixed based on qualitative
analysis
B) using time-and-motion studies
C) at a high cost, which renders it seldom used
D) in a manner that cannot be usefully combined with any other cost estimation
methods
If there is an ethical conflict concerning your direct supervisor, you should first contact
________.
A) the local media
B) an IMA Ethics Counselor
C) an attorney
D) the board of directors
Which of the following is true of benchmarking two managers against each other if they
carry out similar operations?
A) It would lead to better cooperation among the managers.
B) It would reduce the managers' incentives to help one another.
C) It would enhance the accomplishment of organization goals.
D) It would help reduce costs common to both the departments.
Costs of normal spoilage are usually accounted for as ________.
A) a deduction from the cost of goods sold
B) a component of the costs of good units manufactured
C) a "loss from normal spoilage account" in income statement
D) a liability on a balance sheet
Zenich Corp manufactures laptops. The waiting time is 72 minutes before the start of
production and the manufacturing lead time is 164 minutes per laptop. What is its
manufacturing cycle efficiency? (Round to the nearest whole percent.)
A) 44%
B) 64%
C) 56%
D) 78%
Which of the following is a period cost?
A) costs incurred to provide customer service such as the operation of a 800 phone line
to trouble shoot product problems and to answer questions about product warranties
B) the cost of materials used to make a product when those materials are an
insignificant part of the finished product
C) the cost of direct labor
D) the amount of depreciation expense recognized because of the use of plant assets
such as building and equipment
Strategic Analysis of Profitability of King Philip Company:
What is the cost effect of the productivity component (c)?
A) $0
B) $1400 U
C) $300 F
D) $2600 F
A primary consideration in assigning a cost to a responsibility center is ________.
A) whether the cost is fixed or variable
B) whether the cost is direct or indirect
C) who can best control the change in that cost
D) where in the organizational structure the cost was incurred
The contribution-margin format is used for ________.
A) variable costing income statement
B) mixed costing income statement
C) absorption costing income statement
D) job order costing income statement
A cost function is a ________.
A) process of calculating present value of projected cash flows
B) process of allocating costs to cost centers or cost objects
C) mathematical description of how a cost changes with changes in the level of an
activity relating to that cost
D) is a very thorough and detailed way to identifying a cost object when there is a
physical relationship between inputs and outputs
Daniels Corporation used the following data to evaluate their current operating system.
The company sells items for $18 each and had used a budgeted selling price of $19 per
unit.
What is the static-budget variance of operating income?
A) $325,000 favorable
B) $325,000 unfavorable
C) $316,000 favorable
D) $316,000 unfavorable
Which of the following is an example of a revenue object?
A) suppliers
B) products
C) labor
D) duration to complete a given task
Which of the following statements is true of productivity measures?
A) Partial productivity and total factor productivity measures never work best together.
B) Partial productivity explicitly considers gains from using fewer physical inputs as
well as substitution among inputs.
C) All productivity measures are physical measures lacking financial content.
D) Total factor productivity considers the trade-offs across various inputs based on
current input prices.
The White Company has assembled the following data pertaining to certain costs that
cannot be easily identified as either fixed or variable. White Company has heard about a
method of measuring cost functions called the high-low method and has decided to use
it in this situation.
Month Cost Hours
January $40,000 3,630
February $34,500 3,000
March $43,100 3,410
April $51,600 5,030
May $69,300 7,000
June $60,300 4,250
How is the cost function stated?
A) y = $34,500 + $9.90X
B) y = $69,300 + $8.70X
C) y = $34,800 + $11.50X
D) y = $8,400 + $8.70X
Which of the following explains the cost-plus approach to pricing decisions?
A) arriving at a price for the product based on the competitive pricing prevalent in the
market
B) arriving at a price based on the perceived value to a customer given the cost of
design and added features
C) arriving at a price based on the demand and supply trends in the market
D) arriving at a price that earns a target return on investment
Bismite Corporation purchases trees from Cheney lumber and processes them up to the
split-off point where two products (paper and pencil casings) emerge. The products are
then sold to an independent company that markets and distributes them to retail outlets.
The following information was collected for the month of October:
The cost of purchasing 350 trees and processing them up to the split-off point to yield
150,000 sheets of paper and 150,000 pencil casings is $15,500.
Bismite's accounting department reported no beginning inventory.
If the sales value at split-off method is used, what is the approximate production cost for
each paper sheet? (Round intermediary percentages to the nearest hundredth.)
A) $0.043
B) $0.065
C) $0.041
D) $0.062
Davidson Corporation manufactured 53,400 units during September. The following
fixed overhead data relates to September:
What is the fixed overhead spending variance?
A) $1,056 unfavorable
B) $400 favorable
C) $400 unfavorable
D) $1,056 favorable
Which of the following choices is the practice of charging a higher price for the same
product or service when demand approaches the physical limit of the capacity to
produce that product or service?
A) Price discrimination
B) Peak-load pricing
C) Demand-based pricing
D) Customer preference pricing
Which of the following best defines the term: product life cycle?
A) the time span between when the company begins the initial R&D on a product till
the time when the first unit is sold.
B) the span of time from initial R&D on a product to when the customer service and
support for the product is no longer offered
C) the time span between when the company begins the initial R&D on a product till
the time when the last unit is sold
D) the span of time from when the first unit of the product is sold until the last unit of
the product is sold
Crimpson Company has invested $2,200,000 in a plant to make commercial juicer
machines. The target operating income desired from the plant is $303,000 annually. The
company plans annual sales of 7000 juicer machines at a selling price of $500 each.
What is the markup percentage as a percentage of cost for Crimpson Company?
A) 8.7%
B) 13.8%
C) 9.5%
D) 0.9%
The Conity Corporation has an Electric Mixer Division and an Electric Lamp Division.
Of a $13,000,000 bond issuance, the Electric Mixer Division used $9,500,000 and the
Electric Lamp Division used $3,500,000 for expansion. Interest costs on the bond
totaled $975,000 for the year. What amount of interest costs should be allocated to the
Electric Mixer Division? (Round any intermediary calculations two decimal places and
your final answer to the nearest dollar.)
A) $563,333
B) $711,750
C) $3,500,000
D) $9,500,000
A. C .Tech Manufacturing Appliances manufactures three sizes of kitchen appliances:
small, medium, and large. Product information is provided below.
Small Medium Large
Unit selling price $430 $550 $1,230
Unit costs:
Variable manufacturing (200) (320) (700)
Fixed manufacturing (50) (140) (240)
Fixed selling and administrative (90) (25) (130)
Unit profit $90 $65 $160
Demand in units 170 130 170
Machine-hours per unit 70 40 170
The maximum machine-hours available are 6,200 per week.
How many of each product should be produced per month using the short-run profit
maximizing strategy?
A) 0 130 7
B) 14 130 0
C) 170 170 0
D) 170 70 40
Which of the following general ledger accounts will have a subsidiary ledger account?
A) Cost of Goods Sold account
B) Work-in-Process Control account
C) Joe's Accounts Receivable subsidiary account
D) Operating Expenses account
Among different types of costs associated with inventory, the opportunity cost of the
investment tied up in inventory is a(n) ________.
A) purchasing cost
B) ordering cost
C) stockout cost
D) carrying cost
A costing system that omits recording some or all of the journal entries relating to the
cycle from purchase of direct materials to the sale of finished goods is called ________.
A) dependent costing
B) synchronous costing
C) sequential costing
D) backflush costing
Which of the following statements is true?
A) The economic, legal, political, social, and cultural environments differ across
countries.
B) The import quotas and tariffs remain the same across all countries according to the
standards set by United Nations.
C) The advances in telecommunications and transportation, the availability of materials
and skilled labor does not differ significantly across countries.
D) The fixed rate policy is followed across all countries to avoid price fluctuations and
inflation.
