Which of the following is required to arrive at the budgeted units to be produced in a
year?
A) estimated direct materials inventory required at the end of the year
B) estimated finished goods inventory required at the end of the year
C) amount of direct materials to be used during the year
D) amount of manufacturing overhead to be incurred
Tom Magic Company manufactures various kinds of toys for different age groups. The
company’s flagship product is Rx. The company currently requires 8.50 labor hours to
manufacture per unit of Rx. The company believes that because of numerous small
improvements in the process, it will require 0.10 labor-hours less and hence will only
8.40 labor-hours in the next quarter. It will require 8.35 and 8.25 labor-hours in third
and fourth quarter. The company has adopted ________.
A) activity based budgeting
B) kaizen budgeting
C) zero-based budgeting
D) cost-based budgeting
ABC systems create ________.
A) one large cost pool
B) homogeneous activity-related cost pools
C) activity-cost pools with a broad focus
D) activity-cost pools containing many direct costs
Stark Corporation has two departments, Car Rental and Truck Rental. Central costs may
be allocated to the two departments in various ways.
If the facility lease expense of $381,000 is allocated on the basis of vehicles in the fleet,
the amount allocated to the Car Rental Department would be ________. (Do not round
interim calculations. Round the final answer to the nearest whole dollar.)
A) $381,000
B) $249,226
C) $190,500
D) $249,382
Examples of nonfinancial measures of quality include the ________.
A) inspection costs incurred
B) number of customer complaints
C) design engineering costs
D) quality training costs
Mid City Products Inc. (MCP), developed standard costs for direct material and direct
labor. In 2017, MCP estimated the following standard costs for one of their most
popular products.
During September, MCP produced and sold 2,000 units using 12,400 pounds of direct
materials at an average cost per pound of $4.00 and 950 direct labor hours at an average
wage of $15.15 per hour.
The direct labor price variance during September is ________.
A) $750.00 unfavorable
B) $150.00 favorable
C) $142.50 unfavorable
D) $142.50 favorable
Practical capacity is the denominator-level concept that ________.
A) reduces theoretical capacity for unavoidable operating interruptions
B) is the maximum level of operations at maximum efficiency
C) is based on the level of capacity utilization that satisfies average customer demand
over periods generally longer than one year
D) is based on anticipated levels of capacity utilization for the coming budget period
Which of the following is not a benefit of decentralization?
A) Creates competition among subunit managers.
B) Sharpens the focus of subunit managers.
C) Assists in development and learning.
D) creates greater responsiveness to the needs of customers and suppliers.
Which of the following is the correct mathematical expression is used to calculate
variable overhead efficiency variance?
A) (Actual rate − Budgeted rate) × Budgeted quantity
B) (Actual quantity × Budgeted rate) – (Budgeted input quantity allowed for actual
output × Budgeted rate)
C) (Actual quantity Budgeted rate) − (Budgeted quantity Budgeted rate)
D) (Actual quantity Budgeted rate) × Budgeted quantity allowed for actual output
Investment A requires a net investment of $604,021 The required rate of return is 12%
for the three-year annuity. What are the annual cash inflows if the net present value
equals 0? (rounded)
A) $2,416,084
B) $251,466
C) $604,016
D) -$1,812,063
The Brital Company processes unprocessed milk to produce two products, Butter
Cream and Condensed Milk. The following information was collected for the month of
June:
Direct Materials processed: 33,000 gallons
The costs of purchasing the of unprocessed milk and processing it up to the split-off point
to yield a total of 33,000 gallons of saleable product was $55,000.
The company uses constant gross-margin percentage NRV method to allocate the joint
costs of production. Which of the following statements is true of Brital?
A) The gross profit percent of condensed milk is lower than the gross profit of butter
cream.
B) The gross margin is same for both products because constant gross margin percentage
NRV method ignores profits earned before the split-off point.
C) The gross profit of condensed milk is lower than the gross profit of butter cream.
D) The gross margin is allocated to the joint products in order to determine the joint-cost
allocations.
A cost driver should be measurable and have an economically plausible relationship
with the dependent variable which means:
A) that the cost driver can be identified in an economically feasible way
B) that the relationship is based on correlation
C) that the relationship is based on a cause -and-effect criterion and makes economic
sense to management
D) that the relationship must be based on a physical relationship
Dessa Cabinetry, Inc., manufactures standard sized modular cabinet units for kitchens
and other applications within the home. Its costing system utilizes two cost categories,
direct materials and conversion costs. Each product must pass through the rough cut
department and the finish department. Direct materials are added at the beginning of
production. Conversion costs are allocated evenly throughout production.
What is the unit cost per equivalent unit of the beginning inventory in the Finishing
Department? (Round the final answer to the nearest whole dollar.)
A) $240
B) $300
C) $988
D) $1228
Which of the following is an example of division-sustaining costs?
A) research and development cost
B) corporate administration costs
C) corporate brand advertising
D) shipment costs
The Brital Company processes unprocessed milk to produce two products, Butter
Cream and Condensed Milk. The following information was collected for the month of
June:
Direct Materials processed: 33,000 gallons
The costs of purchasing the of unprocessed milk and processing it up to the split-off point
to yield a total of 33,000 gallons of saleable product was $89,450.
The company uses constant gross-margin percentage NRV method to allocate the joint
costs of production. What is the allocated joint costs of Butter Cream?
A) $34,600
B) $15,000
C) $61,925
D) $27,525
Beverage Drink Company processes direct materials up to the split-off point where two
products, A and B, are obtained. The following information was collected for the month
of July:
The cost of purchasing 3000 liters of direct materials and processing it up to the split-off
point to yield a total of 2550 liters of good products was $7500. There were no inventory
balances of A and B.
Product A may be processed further to yield 500 liters of Product Z5 for an additional
processing cost of $170. Product Z5 is sold for $25 per liter. There was no beginning
inventory and ending inventory was 125 liters.
Product B may be processed further to yield 1875 liters of Product W3 for an additional
processing cost of $325. Product W3 is sold for $35 per liter. There was no beginning
inventory and ending inventory was 25 liters.
If Product Z5 and Product W3 are produced, what are the expected sales values of
production, respectively?
A) $65,625 and $12,500
B) $21,000 and $58,500
C) $17,500 and $46,875
D) $12,500 and $65,625
Which of the following approaches spreads underallocated or overallocated overhead
among ending balances in Work-in-Process Control, Finished Goods Control, and Cost
of Goods Sold?
A) the adjusted allocation-rate approach
B) the proration approach
C) the write-off variances to cost of goods sold approach
D) the reinstatement approach
Benchmarking is a process ________.
A) in which overhead costs are absorbed into units of output, or ‘jobs’
B) in which a firm’s performance levels are compared against the best levels of
performance in competing companies or in companies having similar processes
C) which is based on calculating the breakeven point and analyzing the consequences of
changes in various factors calculating the breakeven point
D) in which the underlying processes of an organization is optimized using a systematic
approach to achieve more efficient goals
Which of the following statements is true of gross-margin format of the income
statement?
A) It distinguishes between manufacturing and nonmanufacturing costs.
B) It distinguishes variable costs from fixed costs.
C) It is used for variable costing.
D) It calculates the contribution margin from sales.
A company has three products possible products that it can produce in a machine
intensive production process. Capacity is constrained by the number of hours the
machines can run during a period and the products are so popular that all units produced
will be sold. Here is additional information:
Which of the following would be an accurate conclusion based on these facts?
A) A balanced mix of 1/3 A, 1/3 B, and 1/3 C should be the goal when maximizing
operating income in the short-run.
B) Since Product C has the greatest contribution margin per unit and therefore
emphasizing its production and sales will lead to the highest operating income in the
short-run
C) Since A takes less time to produce, maximization of operating income will occur by
emphasizing production and sales of A.
D) Product B should be emphasized if the goal is to maximize contribution margin.
Successful implementation of a cost leadership strategy will result in ________.
A) large favorable growth and price-recovery components
B) large favorable price-recovery and productivity components
C) large favorable productivity and growth components
D) only a large favorable growth component
Russo Corporation manufactured 15,000 air conditioners during November. The
overhead cost-allocation base is $33.25 per machine-hour. The following variable
overhead data pertain to November:
What is the flexible-budget amount?
A) $441,394
B) $399,000
C) $396,000
D) $475,200
Extreme Manufacturing Company provides the following ABC costing information:
The above activities are used by Departments A and B as follows:
How much of account verification costs will be assigned to Department A?
A) $23,750
B) $28,500
C) $95,000
D) $47,500
Crimpson Corp., a California-based company is selling its products for $21. Its average
variable costs is $23 and the average selling price of its competitors is $26. This is an
example of ________.
A) dumping
B) collusive pricing
C) predatory pricing
D) suicidal pricing
A company should use cost-based transfer prices ________.
A) when a company’s product is specialized
B) the market for the intermediate product is perfectly competitive
C) the interdependencies of subunits are minimal
D) there is no benefit from market-based transfer price
Colil Computer Systems, Inc., manufactures printer circuit cards. All direct materials
are added at the inception of the production process. During January, the accounting
department noted that there was no beginning inventory. Direct materials of $301,000
were used during the month. Work-in-process records revealed that 11,000 card units
were started in January, 5500 card units were complete, and 5400 card units were
spoiled as expected. Ending work-in-process card units are complete in respect to direct
materials costs. Spoilage is not detected until the process is complete.
What is the amount allocated to the work-in-process ending inventory? (Round any cost
per unit calculations to the nearest cent.)
A) $49,235
B) $59,321
C) $2736
D) $75,240
Rachel’s Pet Supply Corporation manufactures two models of grooming stations, a
standard and a deluxe model. The following activity and cost information has been
compiled:
Assume a traditional costing system applies the $160,000 of overhead costs based on
direct labor hours.
a. What is the total amount of overhead costs assigned to the standard model?
b. What is the total amount of overhead costs assigned to the deluxe model?
Assume an activity-based costing system is used and that the number of setups and the
number of components are identified as the activity-cost drivers for overhead.
c. What is the total amount of overhead costs assigned to the standard model?
d. What is the total amount of overhead costs assigned to the deluxe model?
e. Explain the difference between the costs obtained from the traditional costing system
and the ABC system. Which system provides a better estimate of costs? Why?
ERP systems store vast quantities of information about the materials, machines and
equipment, labor, power, maintenance, and setups needed to manufacture different
products. This helps simplify the budgeting process as ERP systems ________.
A) can quickly calculate the manufacturing and nonmanufacturing costs based on a
given sales quantity
B) automatically identify and record changes in processes involved in producing
products
C) identify which underlying assumptions are likely to change
D) always use a rolling budget ensuring that a budget is always available for a specified
future period
Which of the following is the correct mathematical expression to calculate total factor
productivity?
A) Sales value of output produced Quantity of all inputs used
B) Quantity of output produced Quantity of the input used
C) Quantity of output produced Costs of all inputs used
D) Sales value of output produced Cost of inputs required to produce current year
production in previous year
Longer manufacturing cycle times can result in ________.
A) lower revenues and higher inventory carrying costs
B) higher opportunity costs and low profit margins
C) lower opportunity costs and high profit margins
D) higher revenues and lower inventory carrying costs
The determination of a cost as either direct or indirect depends upon the ________.
A) accounting standards
B) tax system chosen
C) inventory valuation
D) cost object chosen
Fine Suiting Company sells shirts for men and boys. The average selling price and
variable cost for each product are as follows:
Men’s Boys’
Selling Price $25.00 Selling Price $24.00
Variable Cost $15.40 Variable Cost $16.00
Fixed costs are $35,200.
Required:
a. What is the breakeven point in units for each type of shirt, assuming the sales mix is
1:1?
b. What is the operating leverage, assuming the sales mix is 2:1 in favor of men’s shirts,
and sales total 5,000 shirts?