1) When forecasting fixed costs, managers should concentrate on total lump-sum costs
instead of unitized fixed overhead costs.
2) Treasury includes banking and short- and long-term financing, investments, and cash
management.
3) A firm operating at breakeven point will pay an income tax of 10%.
4) A difference between the static-budget and the flexible-budget amounts is called the
sales-volume variance.
5) An unfavorable production-volume variance indicates an overallocation of fixed
overhead costs.
6) Direct Disk Drive Company operates a computer disk manufacturing plant. Direct
materials are added at the end of the process. The following data were for August 20X5:
Calculate equivalent units for conversion costs using the FIFO method.
A) 401,500 units
B) 350,000 units
C) 300,000 units
D) 395,000 units
7) Which of the following statements is true of direct costs?
A) A direct cost of one cost object is a true sense of the budgeted costs.
B) All variable costs are direct costs.
C) A direct cost of one cost object can be an indirect cost of another cost object.
D) All fixed costs are direct costs.
8) Fixed costs ________.
A) are considered variable costs over the long run
B) provide less operating leverage
C) reduce the risk of loss
D) are graphed as a steeply sloped line
9) ________ is a measure of the balanced scorecard’s internal process perspective.
A) Service response time
B) Customer satisfaction
C) Gross profit percentage
D) Cost reduction
10) Which item is an indication of credibility under the Standards of Ethical Conduct?
A) Maintain an appropriate level of professional expertise by continually developing
knowledge and skills.
B) Refrain from using confidential information for unethical or illegal advantage.
C) Abstain from engaging in or supporting any activity that might discredit the
profession.
D) Disclose delays or deficiencies in information, timeliness, processing, or internal
controls in conformance with organization policy and/or applicable law.
11) Which of the following is true of absorption costing?
A) It enables a manager to decrease margins and operating income by producing more
beginning inventory.
B) It enables a manager to increase margins and operating income by producing more
beginning inventory.
C) It enables a manager to decrease margins and operating income by producing more
ending inventory.
D) It enables a manager to increase margins and operating income by producing more
ending inventory.
12) The method that restates all overhead entries in the general ledger and subsidiary
ledgers using actual cost rates rather than budgeted cost rates is called ________.
A) the adjusted allocation rate approach
B) the proration approach
C) the write-off of cost of goods sold approach
D) the weighted-average cost approach
13) Genent Company manufactures tires. Some of the company’s data was misplaced.
Use the following information to replace the lost data:
Actual Results Flexible Budget Variances Flexible Budget Sales-Volume Variances
Static Budget
Units sold 495,000 495,000 453,750
Revenues $185,150 $4,400 F (A) $6,160 U (B)
Variable costs (C) $880 U $69,780 $10,300 F $88,080
Fixed costs $36,430 $3,770 F $40,200 0 $40,200
Operating income $78,060 (D) $70,770 (E) $66,630
What are the actual variable costs (C)?
A) $72,800
B) $70,660
C) $62,640
D) $54,080
14) What is the cost of unused capacity for conversion costs of Argon?
A) $3,750
B) $7,500
C) $9,375
D) $1,875
15) It only makes sense to implement an ABC system when ________.
A) a single product is produced in bulk
B) its benefits exceed its implementation costs
C) it traces more costs as direct costs
D) production process is labor-intensive
16) Filex Company manufactures pipes and applies manufacturing overhead costs to
production at a budgeted indirect-cost rate of $18 per direct labor-hour. The following
data are obtained from the accounting records for June 2014:
For June 2014, manufacturing overhead is ________.
A) overallocated by $6,500
B) underallocated by $21,500
C) overallocated by $21,500
D) underallocated by $6,500
17) Which of the following statements is true of the the economic order quantity
decision model?
A) The economic order quantity increases with higher demand and higher carrying
costs and decreases with higher ordering costs.
B) The simplest version of the economic order quantity model assumes there are only
ordering costs, carrying costs, stockout costs, and purchasing costs.
C) It assumes the purchase order lead time is not known with certainty.
D) The larger the order quantity, the lower the annual relevant ordering costs and the
higher the annual relevant carrying costs.
18) Genent Industries, Inc. (GII), developed standard costs for direct material and direct
labor. In 2015, GII estimated the following standard costs for one of their major
products, the 30-gallon heavy-duty plastic container.
During July, GII produced and sold 3,000 containers using 1,000 pounds of direct
materials at an average cost per pound of $19 and 625 direct manufacturing labor hours
at an average wage of $11.75 per hour.
The direct manufacturing labor efficiency variance during July is ________.
A) $300.00 unfavorable
B) $156.25 favorable
C) $143.75 favorable
D) $131.75 unfavorable
19) Which of the following is explains the cost-plus approach to pricing decisions?
A) arriving at a price for the product based on the competitive pricing prevalent in the
market
B) arriving at a price based on the perceived value to a customer given the cost of
design and added features
C) arriving at a price based on the demand and supply trends in the market
D) arriving at a price that earns a specific return given the cost of the product
20) What revenue or expense amounts are necessary to make a sell-or-process-further
decision and why? What items are irrelevant to the decision and why?
21) Explain the difference between an inventoriable cost and a period cost. What
potential problems does an inaccurate classification of product and period costs cause?
22) What is the primary reason a firm would adopt target costing?
23) Even though there are no inventories for service companies, ABC systems are of
great use for service companies. Explain why and how.
24) What is strategy? Briefly describe the two broad types of strategies that companies
may choose to pursue.
25) What are the principles of lean accounting? Are there any limitations? Discuss.
26) Quindo Table Company manufactures tables for schools. The 2015 operating
budget is based on sales of 44,000 units at $55 per table. Operating income is
anticipated to be $132,000. Budgeted variable costs are $35 per unit, while fixed costs
total $660,000.
Actual income for 2015 was a surprising $477,000 on actual sales of 46,000 units at
$57 each. Actual variable costs were $33 per unit and fixed costs totaled $627,000.
Required:
Prepare a variance analysis report with both flexible-budget and sales-volume
variances.
