1) Buzz’s Educational Software Outlet sells two or more of the video games as a single
package. Managers are keenly interested in individual product-profitability figures.
Information pertaining to three bundled products and the stand-alone prices is as
follows:
Using the incremental method, what amount of revenue will be allocated to Math Fun
in the package that contains all three products? Assume Reading Fun is the primary
product, followed by Math Fun, and then Analysis.
A) $24.12
B) $30.00
C) $22.80
D) $25.33
2) ________ is a cost that, if eliminated, would reduce the actual or perceived value or
utility (usefulness) customers experience from using the product or service.
A) Non-value-added cost
B) Discretionary cost
C) Value-added cost
D) Committed cost
3) Goldfarb’s Book and Music Store has two service departments, Warehouse and Data
Center. Warehouse Department costs of $350,000 are allocated on the basis of budgeted
warehouse-hours. Data Center Department costs of $150,000 are allocated based on the
number of computer log-on hours. The costs of operating departments Music and Books
are $250,000 and $300,000, respectively. Data on budgeted warehouse-hours and
number of computer log-on hours are as follows:
Using the step-down method, what amount of Data Center Department cost will be
allocated to the Warehouse Department if the service department with the highest
percentage of interdepartmental support service is allocated first? (Round up)
A) $50,000
B) $150,000
C) $15,000
D) $0
4) What would be the cost savings if Argon decides to reduce manufacturing capacity
by 2,500 kgs?
A) $9,375
B) $3,750
C) $1,875
D) $7,500
5) ________ is an after-sale support provided to customers.
A) Distribution
B) Customer service
C) Production
D) Marketing
6) What would be the average fixed maintenance cost per unit at an activity level of
8,600 machine-hours in a month? Assume that this level of activity is within the
relevant range.
A) $93.64
B) $67.08
C) $64.74
D) $75.15
7) Which purpose of cost allocation is used to encourage sales representatives to push
high-margin products or services?
A) to provide information for economic decisions
B) to motivate managers and other employees
C) to justify costs or compute reimbursement
D) to measure income and assets for reporting to external parties
8) When corporate-sustaining costs are fully allocated to distribution channels, then the
sum of the distribution-channel operating incomes is ________.
A) greater than companywide operating income
B) equal to companywide operating income
C) equal to customer-level operating income
D) greater than customer-level operating income
9) Which of the following is a sign that an ABC system may be useful for an
organization?
A) Significant amounts of indirect costs are allocated using multiple cost pools.
B) Products make similar demands on resources because of similarities in volume,
process steps, batch size, or complexity.
C) Many indirect costs are described as batch-level costs, product-sustaining costs, or
facility-sustaining costs.
D) Operations staff disagrees with accountants about the costs of manufacturing and
marketing products and services.
10) Filippucci Company used a budgeted indirect-cost rate for its manufacturing
operations, the amount allocated ($200,000) is different from the actual amount
incurred ($225,000).
Ending balances in the relevant accounts are:
Which account is credited to write off the difference between allocated and actual
overhead using the proration approach?
A) Work-in Process Control
B) Manufacturing Overhead Allocated
C) Finished Goods Control
D) Manufacturing Overhead Control
11) Domose Inc. planned to use $150 of material per unit but actually used $147 of
material per unit, and planned to make 1,100 units but actually made 900 units.
The flexible-budget amount for materials is ________.
A) $165,000
B) $135,000
C) $161,700
D) $132,300
12) Stiller Corporation incurred fixed manufacturing costs of $24,000 during 2015.
Other information for 2015 includes:
The budgeted denominator level is 2,000 units.
Units produced total 1,500 units.
Units sold total 1,200 units.
Beginning inventory was zero.
The company uses absorption costing and the fixed manufacturing cost rate is based on
the budgeted denominator level. Manufacturing variances are closed to cost of goods
sold.
Fixed manufacturing costs included in ending inventory total ________.
A) $4,800
B) $6,000
C) $3,600
D) 0
13) Stephanie’s Bridal Shoppe sells wedding dresses. The average selling price of each
dress is $1,000, variable costs are $400, and fixed costs are $90,000. How many dresses
must the Bridal Shoppe sell to yield after-tax net income of $18,000, assuming the tax
rate is 40%?
A) 200 dresses
B) 170 dresses
C) 150 dresses
D) 145 dresses
14) Which of the following statements is true of choosing cost drivers under
activity-based costing?
A) All the cost drivers should be unit-level cost drivers.
B) There should be a clear cause-and-effect relationship between cost drivers and cost
pools.
C) Cost drivers are independent variables.
D) A single cost driver should be identified for all the activities.
15) Discontinuing an unprofitable customer ________.
A) will eliminate all corporate costs assigned to and may result in losing more revenues
relative to costs saved
B) will eliminate all costs assigned to and may result in gaining more revenues relative
to costs saved
C) will not eliminate all costs assigned to and may result in losing more revenues
relative to costs saved
D) will not eliminate all corporate costs assigned to and may result in gaining more
revenues relative to costs saved
16) The Comil Corporation recently purchased a new machine for its factory operations
at a cost of $390,875. The investment is expected to generate $125,000 in annual cash
flows for a period of five years. The required rate of return is 12%. The old machine has
a remaining life of five years. The new machine is expected to have zero value at the
end of the five-year period. The disposal value of the old machine at the time of
replacement is zero. What is the internal rate of return?
A) 15%
B) 16%
C) 17%
D) 18%