StatPro Corporation
StatPro Corporation is a manufacturer of a versatile statistical calculator. The following
information is a summary of defective and returned units for the previous year.
Refer to StatPro Corporation. The profit lost by selling defective units not reworked is
a. $25,000.
b. $15,000.
c. $18,750.
d. $3,750.
The fixed costs of service departments should be allocated to production departments
based on
a. actual short-run utilization based on predetermined rates.
b. actual short-run units based on actual rates.
c. the service department’s expected costs based on expected long-run use of capacity.
d. the service department’s actual costs based on actual utilization of services.
An implication of the demand-pull nature of the JIT production process is that
a. finished goods inventories must be available to meet customer demand, although raw
material is delivered on an as-needed basis.
b. more storage space for inventories is necessary.
c. finished products are packaged and shipped to customers immediately, thus requiring
minimal finished goods inventories.
d. problem areas become less visible as inventories are reduced.
In selecting non-financial performance measures managers should choose measures that
reflect
a. qualitative characteristics that point out sub-optimization activities and throughput
bottlenecks.
b. both short-term and long-term measures related to critical success factors.
c. long-term supplier satisfaction levels.
d. short-term financial viability.
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 three-variance approach, what is the
spending variance?
a. $ 4,375 U
b. $ 3,625 F
c. $ 8,000 U
d. $15,750 U
Stayton Enterprises
Refer to Stayton Enterprises. For April, prime cost incurred was
a. $78,000.
b. $84,000
c. $51,000.
d. $45,000.
Charleston Company uses a job-order costing system. During April, the following costs
appeared in the Work in Process Inventory account:
Charleston Company applies overhead on the basis of direct labor cost. There was only
one job left in Work in Process at the end of April which contained $5,600 of overhead.
What amount of direct material was included in this job?
a. $4,400
b. $4,480
c. $6,920
d. $8,000
Which of the following journal entries records the accrual of the cost of indirect labor
used in production?
a. debit Work in Process Inventory, credit Wages Payable
b. debit Work in Process Inventory, credit Manufacturing Overhead
c. debit Manufacturing Overhead, credit Work in Process Inventory
d. debit Manufacturing Overhead, credit Wages Payable
The actual time it takes to perform a specific task is called
a. inspection time.
b. service time.
c. transfer time.
d. quality time.
In activity-based costing, preliminary cost allocations assign costs to
a. departments.
b. processes.
c. products.
d. activities.
Moore Company.
Moore Company uses a job-order costing system and the following information is
available from its records. The company has three jobs in process: #6, #9, and #13.
Direct material was requisitioned as follows for each job respectively: 30 percent, 25
percent, and 25 percent; the balance of the requisitions was considered indirect. Direct
labor hours per job are 2,500; 3,100; and 4,200; respectively. Indirect labor is $33,000.
Other actual overhead costs totaled $36,000.
Refer to Moore Company. What is the total amount of overhead applied to Job #9?
a. $18,250
b. $26,350
c. $30,000
d. $31,620
Objectives for a pay plan
a. are not needed in a performance-based plan.
b. must be stated for a performance-based plan to work.
c. are essential for a periodic compensation plan to be successful.
d. are unnecessary for a merit pay plan.
St. Paul Medical Clinic has two service departments: Building Operations and Utilities,
and three operating departments: Rehabilitation, Preventative Medicine, and Geriatrics.
St. Paul Medical Clinic allocates the cost of Building Operations on the basis of square
footage and Utilities on the basis of patient days. Fixed and variable costs are not
separated.
Budgeted operating data for the previous year are presented below:
Required:
Southern Digital, Inc.
The Southern Digital, Inc. produces a high-quality computer chip. Unit production costs
(based on capacity production of 100,000 units per year) follow:
Refer to Southern Digital, Inc. Assume, for this question only, that the Memory
Division is operating at a level of 70,000 chips per year. What is the minimum price that
the division would consider on a “special order” of 1,000 chips to be distributed through
normal channels?
a. $78
b. $95
c. $100
d. $81
Louwers Corporation recently sold a used machine for $50,000. The machine had a
book value of $75,000 at the time of the sale. What is the after-tax cash flow from the
sale, assuming the company’s marginal tax rate is 25 percent?
a. $43,750
b. $50,000
c. $56,250
d. $75,000
The detailed plan for the acquisition and replacement of major portions of property,
plant, and equipment is known as the
a. capital budget.
b. purchases budget.
c. commitments budget.
d. treasury budget.
Epplin Company
The following information is provided for Epplin Company for the month of
September:
Refer to Epplin Company. What is the price variance?
a. $4,450 F
b. $4,450 U
c. $1,000 F
d. $1,000 U
Standard costs
a. are estimates of costs attainable only under the most ideal conditions.
b. are difficult to use with a process costing system.
c. can, if properly used, help motivate employees.
d. require that significant unfavorable variances be investigated, but do not require that
significant favorable variances be investigated.
Shiny Floors Company
Shiny Floors Company produces four floor cleaners from the same process: C, D, E,
and G. Joint product costs are $9,000. (Round all answers to the nearest dollar.)
If Shiny Floors sells the products after further processing, the following disposal costs
will be incurred: C, $2.50; D, $1.00; E, $3.50; G, $6.00.
Refer to Shiny Floors Company. Using a physical measurement method, what amount
of joint processing cost is allocated to Product C?
a. $3,495
b. $2,447
c. $1,748
d. $1,311
Shannon Companies
Refer to Shannon Companies. For Company C, what are the budgeted cash collections?
a. $200
b. $300
c. $400
d. $500
If life-cycle costs exceed the target cost of a product, managers will strive to reduce
a. the cost of special orders.
b. the level of activities that are non-value-added.
c. product variety.
d. period costs.
Victoria Company
Victoria Company manufactures three products in a joint process which costs $25,000.
Each product can be sold at split-off or processed further and then sold. 10,000 units of
each product are manufactured. The following information is available for the three
products:
Refer to Victoria Company. If Product A is processed beyond the split-off point, profit
will:
a. increase by $210,000
b. increase by $120,000
c. increase by $ 90,000
d. remain unchanged
Relative to qualitative performance measures, quantitative performance measures are
less
a. subject to manipulation.
b. dependent on accounting information.
c. effective in the pursuit of organizational goals.
d. subjective.
A rational and systematic allocation base for service department costs should reflect the
cost accountant’s consideration of all of the following except
a. the ability of revenue-producing departments to bear the allocated costs.
b. the benefits received by the revenue-producing department from the service
department.
c. a causal relationship between factors in the revenue-producing department and costs
incurred in the service department.
d. all of the above are considerations.
Management accounting
a. is more concerned with the future than is financial accounting.
b. is less concerned with segments of a company than is financial accounting.
c. is more constrained by rules and regulations than is financial accounting.
d. all of the above are true.
Productive capacity is a measure used in computing
a. residual income.
b. net cash flow.
c. return on investment.
d. throughput.
The JIT environment has caused a reassessment of product costing techniques. Which
of the following statements is true with respect to this reassessment?
a. Traditional cost allocations based on direct labor are being questioned and criticized.
b. The federal government, through the SEC, is responsible for the reassessment.
c. The reassessment is caused by the replacement of machine hours with labor hours.
d. None of the above is true.
While preparing a salad, the chef removes the core from a head of lettuce. This core
would be classified as
a. defective.
b. shrinkage.
c. waste.
d. scrap.
In a CVP graph, the area between the total cost line and the total fixed cost line yields
the
a. fixed costs per unit.
b. total variable costs.
c. profit.
d. contribution margin.
In computing the accounting rate of return, the ____ level of investment should be used
as the denominator.
a. average
b. initial
c. residual
d. cumulative
CVP analysis is based on concepts from
a. standard costing.
b. variable costing.
c. job order costing.
d. process costing.
Discuss how spoilage is treated in EUP computations.
In a special order decision, the sales price should be sufficient to cover a job’s variable
costs, incremental fixed costs, and generate a profit.
For an ordinary annuity, the first cash flow occurs at the end of the period.
In a multi-product environment, CVP analysis makes the assumption that a company’s
sales mix is constant.
An investment in inventory yields a return when it is sold to a third party.
A company that produces sugar will use a process costing system to track production
costs.
A discrete loss is assumed to occur at a specific point in the production process.
An effective reporting system is increasingly important in a decentralized organization.
Information that has a bearing on future events is relevant in the decision-making
process.
Why are fixed overhead variances considered noncontrollable?
Berkshire Company
The following information is available for Berkshire Company for the current year:
Standard:
Material X: 3.0 pounds per unit @ $4.20 per pound
Material Y: 4.5 pounds per unit @ $3.30 per pound
Class S labor: 3 hours per unit @ $10.50 per hour
Class US labor: 7 hours per unit @ $8.00 per hour
Actual:
Material X: 3.6 pounds per unit @ $4.00 per pound (purchased and used)
Material Y: 4.4 pounds per unit @ $3.25 per pound (purchased and used)
Class S labor: 3.8 hours per unit @ $10.60 per hour
Class US labor: 5.7 hours per unit @ $7.80 per hour
Berkshire Company produced a total of 45,750 units.
Refer to Berkshire Company. Compute the material price, mix, and yield variances
(round to the nearest dollar).
Refer to Berkshire Company. Compute the labor rate, mix, and yield variances (round
to the nearest dollar).
Standard costing is compatible with both FIFO and weighted average methods of
costing.
Weaver Corporation
Weaver Corporation is considering an investment in a new product line. The investment
would require an immediate outlay of $100,000 for equipment and an immediate
investment of $200,000 in working capital. The investment is expected to generate a net
cash inflow of $100,000 in year 1, $150,000 in year 2, and $200,000 in years 3 and 4.
The equipment would be scrapped (for no salvage) at the end of the fourth year and the
working capital would be liquidated. The equipment would be fully depreciated by the
straight-line method over its four-year life.
Refer to Weaver Corporation. What is the payback period for the investment?
In a mutually inclusive project situation, if one project is chosen, all related projects are
eliminated from further consideration.
Discuss the characteristics of a company for which ABC would be appropriate.
Define a variable cost and a fixed cost. What causes changes in these costs? Give two
examples of each.
In an outsourcing decision, unavoidable fixed costs are irrelevant.