1) The cost-allocation base is a systematic way to link an indirect cost or group of
indirect costs to cost objects.
2) A cost driver is a variable, such as the level of activity or volume that causally affects
costs over a given time span.
3) Evaluating performance of managers over a long period, say over three-to five-years,
helps to reduce undesirable buildup of inventories.
4) Managers implementing ABC systems for the first time always start by analyzing
budgeted costs to identify activity-cost pools.
5) Weighted-average cost per equivalent unit is obtained by dividing the sum of costs
for beginning work in process plus costs for work done in the current period by total
equivalent units of work done to date.
6) Environmental costs that are incurred over several years of the product’s life cycle
are often locked in at the product- and process-design stage.
7) Managers should use past data to create a cost function and then use the exact
information provided by that cost function to create the budgetary forecast for the next
year.
8) Beta Corporation uses a job cost system and has two production departments, A and
B. Budgeted manufacturing costs for the year are:
The actual material and labor costs charged to Job #432 were as follows:
Beta applies manufacturing overhead costs to jobs on the basis of direct manufacturing
labor cost using departmental rates determined at the beginning of the year.
Proportion of manufacturing overhead with respect to the total cost of the job is
________.
A) 39.74%
B) 38.62%
C) 26.62%
D) 42%
9) Davis Corporation has provided the following production and total cost data for two
levels of monthly production volume. The company produces a single product.
The best estimate of the total monthly fixed manufacturing cost is:
A) $130,000
B) $177,600
C) $34,800
D) $225,200
10) Which of the following is true about the assumptions underlying basic CVP
analysis?
A) Selling price varies with demand and supply of the product.
B) Only selling price and variable cost per unit are known and constant.
C) Only selling price, variable cost per unit, and total fixed costs are known and
constant.
D) Selling price, variable cost per unit, fixed cost per unit, and total fixed costs are
known and constant.
11) The relevant terminal disposal price of a machine equals the ________.
A) difference between the salvage value of the old machine and the ultimate salvage
value of the new machine
B) total of the salvage values of the old machine and the new machine
C) salvage value of the old machine
D) salvage value of the new machine
12) Crush Company makes internal transfers at 160% of full cost. The Soda Refining
Division purchases 40,000 containers of carbonated water per day, on average, from a
local supplier, who delivers the water for $40 per container via an external shipper. To
reduce costs, the company located an independent supplier in Illinois who is willing to
sell 40,000 containers at $30 each, delivered to Crush Company’s Shipping Division in
Missouri. The company’s Shipping Division in Missouri has excess capacity and can
ship the 40,000 containers at a variable cost of $4.50 per container. What is the total
cost of purchasing the water from the Illinois supplier and shipping it to the Soda
Division?
A) $1,200,000
B) $1,380,000
C) $1,600,000
D) $180,000
13) Unile Auto produces and sells an auto part for $60.00 per unit. In 2015, 100,000
parts were produced and 75,000 units were sold. Other information for the year
includes:
What is the inventoriable cost per unit using absorption costing?
A) $25.00
B) $31.00
C) $32.50
D) $38.50
14) The operating budget process generally concludes with the preparation of the
________.
A) production budget
B) cash flow statement
C) research and development budget
D) budgeted income statement
15) The order to follow when preparing the operating budget is ________.
A) revenues budget, production budget, and direct manufacturing labor costs budget
B) costs of goods sold budget, production budget, and cash budget
C) revenues budget, manufacturing overhead costs budget, and production budget
D) cash expenditures budget, revenues budget, and production budget
16) The following information pertains to Razor’s Corp:
What is the average manufacturing cost per unit?
A) $11.00
B) $9.00
C) $11.25
D) $11
17) Negotiated transfer prices are often employed when ________.
A) market prices are stable
B) market prices are volatile
C) market prices change by a regular percentage each year
D) goal congruence is not a major objective
18) Which of the following statements about normal costing is true?
A) Direct costs and indirect costs are traced using an actual rate.
B) Direct costs and indirect costs are traced using budgeted rates.
C) Direct costs are traced using a budgeted rate, and indirect costs are allocated using
an actual rate.
D) Direct costs are traced using an actual rate, and indirect costs are allocated using a
budgeted rate.
19) The adjusted allocation approach yields the benefits of ________.
A) timeliness and convenience of normal costing
B) allocating budgeted manufacturing overhead costs at the end of the year
C) write-off to the cost of goods sold approach
D) the proration approach
20) Which of the following statements best defines a just-in-time production system?
A) a push-through system that manufactures finished goods for inventory on the basis
of demand forecasts
B) a push-through system in which each component in a production line is produced
immediately as needed by the next step in the production line
C) a demand-pull system that manufactures finished goods for inventory on the basis of
demand forecasts
D) a demand-pull system in which each component in a production line is produced
immediately as needed by the next step in the production line
21) The last step of the five-step decision making process is implementing the decision,
evaluating performance, and learning. How can a balanced scorecard play a role in
helping to assure this final step will be successful?
22) Discuss the issues and complications that may arise when multinational
corporations conduct performance measurement and comparisons among divisions
located in different countries.
23) What are control charts and how can inferences be drawn from them?
24) Why would a manager perform customer-profitability analysis?
25) Consider revenues from three of Megafy’s 10 wholesale customers in 2015:
What conclusion can be drawn from the above data? Which steps the manager of the
company can take?
26) Do activity-based costing systems always provide more accurate product costs than
conventional cost systems? Why or why not?
27) List three reasons why we allocate joint costs to individual products or services.
Give an example of when the particular cost allocation reason would come into use.