When non-value added time is greater, manufacturing cycle efficiency is lower.
The financial perspective of the balanced scorecard addresses the things that an
organization needs to do well to meet customer needs and expectations.
Purchases of inventory create a continuous cash outflow each period.
If overapplied factory overhead is immaterial, the account is closed by a credit to Cost
of Goods Sold.
Direct materials are normally considered batch-level costs.
Abnormal spoilage is considered a period cost.
Engineered costs may be either variable or fixed.
The customer value perspective of the balanced scorecard addresses the things that an
organization needs to do well to meet customer needs and expectations.
Negotiated transfer prices are most appropriate for low cost and low volume services.
The accounting rate of return considers the salvage value of an asset.
If the cost of an additive is $5,000 + $0.50 for every unit of solvent produced, the cost
is classified as a step cost.
Variable cost per unit remains constant within the relevant range.
ERP systems are
A. packaged software.
B. methods of examining processes.
C. ways to downsize.
D. ways to expand geographical operations.
The ISO 9000 series refers to
A. international guidelines for quality standards.
B. provisions regarding benchmarking activities in the European Union.
C. guidelines for appropriate expenditures on the various categories of quality costs.
D. all of the above.
Exotic Chocolate Company produces baking chocolate for use by commercial
organizations. The company is analyzing its operations in preparation for reconfiguring
its factory setup.
Currently, each batch of chocolate requires the following processes:
a) Calculate the total cycle time necessary to manufacture a batch of chocolate.
b) Identify the value-added functions
c) Calculate the manufacturing cycle efficiency (MCE) of this process.
d) Assume that a management consultant has established a goal that Exotic Chocolate
Company increase its MCE to 5 percent or greater. Identify three possible areas in
which the company could reduce its cycle time.
Houston National Bank
Houston National Bank had the following activities, traceable costs, and
physical flow of driver units:
The above activities are used by the Memorial branch and the University branch:
Refer to Houston National Bank. What is the cost per driver unit for the withdrawal
activity?
A. $0.09
B. $0.075
C. $30.00
D. $50.00
Daniels Company started 9,000 units in March. The company transferred out 7,000
finished units and ended the period with 3,500 units that were 40 percent complete as to
both material and conversion costs. Beginning Work in Process Inventory units were
A. 500.
B. 600.
C. 1,500.
D. 2,000.
A project’s after-tax net present value is increased by all of the following except
A. revenue accruals.
B. cash inflows.
C. depreciation deductions.
D. expense accruals.
Which of the following would not be considered a value-added activity in the
preparation of a tax return?
A. printing a copy of the return for the client
B. printing a copy of the return for the IRS
C. installing tax software
D. checking for accuracy
Lubbock Company has made the following information available for its production
facility for the current month. Fixed overhead was estimated at 22,000 machine hours
for the production cycle. Actual machine hours for the period were 22,500; 4,200 units
were produced.
Lubbock Company’s standard costs are as follows:
Determine the following items:
a. material purchase price variance
b. standard quantity allowed for material
c. total standard cost of material allowed
d. actual quantity of material used
e. labor rate variance
f. standard hours allowed for labor
g. total standard cost of labor allowed
h. labor efficiency variance
i. actual variable overhead incurred
j. standard machine hours allowed
k. variable overhead efficiency variance
l. budgeted fixed overhead
m. applied fixed overhead
n. fixed overhead spending variance
o. volume variance
p. total overhead variance
Michigan Company
Ann Arbor Division of the Michigan Company has the following statistics for its most
recent operations:
Refer to Michigan Company. If Michigan Company evaluates its managers on the basis
of return on investment, the manager of Ann Arbor Division would invest in a project
costing $100,000 only if it increased net segment income by at least
A. $10,000.
B. $15,000.
C. $20,000.
D. $25,000.
Magnificent Motor Corporation
The Engine Division of Magnificent Motor Corporation uses 5,000 carburetors per
month in its production of automotive engines. It presently buys all of the carburetors it
needs from two outside suppliers at an average cost of $100. The Carburetor Division
of Magnificent Motor Corporation manufactures the exact type of carburetor that the
Engine Division requires. The Carburetor Division is presently operating at its capacity
of 15,000 units per month and sells all of its output to a foreign car manufacturer at
$106 per unit. Its cost structure (on 15,000 units) is:
Assume that the Carburetor Division would not incur any variable selling costs on units
that are transferred internally.
Refer to Magnificent Motor Corporation. What is the maximum of the transfer price
range for a transfer between the two divisions?
A. $106
B. $100
C. $90
D. $70
The term “discretionary costs” refers to
A. costs that management decides to incur in the current period to enable the company
to achieve objectives other than the filling of orders placed by customers.
B. costs that are likely to respond to the amount of attention devoted to them by a
specified manager.
C. costs that are governed mainly by past decisions that established the present levels of
operating and organizational capacity and that only change slowly in response to small
changes in capacity.
D. amortization of costs that were capitalized in previous periods.
Explain the source of variable overhead spending and efficiency variances and how
these variances are computed.
A system of inventory production where goods are produced in anticipation of
customer orders is referred to as a _________________________.
Costs incurred for monitoring or inspecting products are known as
____________________ costs.
Seminole Wire Corporation
The Wire Products Division of Seminole Wire Corporation produces “bales” of steel
wire that are used in various commercial applications. The bales sell for an average of
$20 each and The Wire Products Division has the capacity to produce 10,000 bales per
month. The Consumer Products Division of Seminole Wire Corporation uses
approximately 2,000 bales of steel wire each month in its production of various
appliances. The operating information for the Wire Products Division at its present level
of operations (8,000 bales per month) follows:
The Consumer Products Division currently pays $15 per bale for wire obtained from its
external supplier.
Refer to Seminole Wire Corporation. If the Consumer Products Division agrees to pay
the Wire Products Division $16 per bale for 2,000 bales this month, what would be
Consumer’s change in total profits?
Discuss differences in approach and potential usage between target and kaizen costing.
How can return on investment result in sub-optimization when it is used as a
performance measure?
A device that alters behavior if the control system indicates a need to do so is referred
to as ____________________.