1) A responsibility center is a part, segment, or subunit of an organization whose
manager is accountable for a specified set of activities.
2) Operating plans are generally expressed through long-run budgets.
3) Overtime premium is normally considered as a component of direct labor.
4) Merchandising companies purchase products and sell them to customers without
changing their basic form.
5) Using capital budgeting techniques to track and (based on success to date) modify
resource levels committed to staged R&D investments is called timed options.
6) The price variance is the difference between the actual price and the budgeted price
of the input, multiplied by the actual quantity of input.
7) One reason indirect costs may be underapplied is if actual indirect costs are less than
budgeted indirect costs.
8) Long-run planning and short-run planning are best performed independently of each
other.
9) Which of the following steps in designing an accounting-based performance measure
includes decisions of selecting net income as a measure of financial performance?
A) choosing performance measures that align with the firm’s financial goals
B) choosing the time horizon of each performance measure
C) choosing the details for each performance measure
D) choosing a target level of performance
10) What would be the total variable inspection cost at an activity level of 6,700
machine-hours in a month? Assume that this level of activity is within the relevant
range.
A) $423,680
B) $443,540
C) $161,604
D) $578,048
11) Xenon Company makes watches. The fixed overhead costs for 2015 total $648,000.
The company uses direct labor-hours for fixed overhead allocation and anticipates
21,600 hours during the year for 540,000 units. An equal number of units are budgeted
for each month.
During October, 48,000 watches were produced and $52,000 was spent on fixed
overhead.
Required:
a.Determine the fixed overhead rate for 2015 based on the units of input.
b.Determine the fixed overhead static-budget variance for October.
c.Determine the production-volume overhead variance for October.
12) Tally Corp. sells softwares during the recruiting seasons. During the current year,
11,000 softwares were sold resulting in $440,000 of sales revenue, $110,000 of variable
costs, and $48,000 of fixed costs.
If sales increase by $60,000, operating income will increase by ________.
A) $10,000
B) $40,000
C) $45,000
D) $60,000
13) ________ perspective of the balanced scorecard focuses on a company’s own
operations that create value for customers that, in turn, help achieve financial
objectives.
A) Financial
B) Customer
C) Internal-business-process
D) Learning-and-growth
14) Hanung Corp has two service departments, Maintenance and Personnel.
Maintenance Department costs of $300,000 are allocated on the basis of budgeted
maintenance-hours. Personnel Department costs of $100,000 are allocated based on the
number of employees. The costs of operating departments A and B are $160,000 and
$240,000, respectively. Data on budgeted maintenance-hours and number of employees
are as follows:
Using the direct method, what amount of Personnel Department costs will be allocated
to Department A?
A) $25,000
B) $28,000
C) $30,000
D) $20,000
15) The top management at Groundsource Company, a manufacturer of lawn and
garden equipment, is attempting to recover from a fire that destroyed some of their
accounting records. The main computer system was also severely damaged. The
following information was salvaged:
Tractor Division Tiller Division Digger Division
Sales $10,000,000 (a) $2,400,000
Net operating income $1,000,000 $1,440,000 $600,000
Operating assets (b) (c) $2,000,000
Return on investment 0.2 0.1 (d)
Return on sales (e) 0.12 0.25
Investment turnover (f) (g) 1.2
What is the value of the operating assets belonging to the Tractor Division?
A) $ 3,500,000
B) $4,000,000
C) $4,500,000
D) $5,000,000
16) Assume only the specified parameters change in a CVP analysis. The contribution
margin percentage increases when ________.
A) total fixed costs increase
B) total fixed costs decrease
C) variable costs per unit increase
D) variable costs per unit decrease
17) Which of the following is a nonlinear cost function?
A) increase in revenues with increase in sales in units
B) total fixed cost of $25,000
C) variable cost of $5 per unit
D) learning curve function
18) Which of the following transfer-pricing methods always achieves goal congruence?
A) a market-based transfer price
B) a cost-based transfer price
C) a negotiated transfer price
D) full-cost plus a standard profit margin
19) Explain the procedure how overhead indirect costs become a part of work-in
process inventory.
20) List the four steps to develop budgeted variable overhead cost-allocation.
21) The Carolina Company prepares lumber for companies who manufacture furniture.
The main product is finished lumber with a byproduct of wood shavings. The byproduct
is sold to plywood manufacturers. For July, the manufacturing process incurred
$332,000 in total costs. Eighty thousand board feet of lumber were produced and sold
along with 6,800 pounds of shavings. The finished lumber sold for $6.00 per board foot
and the shavings sold for $0.60 a pound. There were no beginning or ending
inventories.
Required:
Prepare an income statement showing the byproduct (1) as a cost reduction during
production, and (2) as a revenue item when sold.
22) What are the undesirable effects of value engineering and target costing? How can
these be reduced?
23) Ralph Company has been very aggressive in developing various types of financial
and nonfinancial measurement schemes to help with the evaluation of its manufacturing
processes. It appears that some of the managers are suboptimizing in that their decision
processes are geared solely for their department’s benefit, sometimes to the detriment of
the organization as a whole.
Required:
What changes in the evaluation system could the company implement to help minimize
the suboptimization of the managers’ decision-making process?
24) Describe methods which may be used to allocate support costs within organizations
containing multiple support departments. Discuss advantages and disadvantages of the
various methods.
25) Differentiate between a cost pool and a cost-allocation base.
26) Steve Corporation is using the kaizen approach to budgeting for 2015. The
budgeted income statement for January 2015 is as follows:
Under the kaizen approach, cost of goods sold and variable operating expenses are
budgeted to decline by 1% per month.
Required:
Prepare a kaizen-based budgeted income statement for March of 2015.