Cost Final

Ways to "produce for inventory" that result in increasing operating income include:

deferring maintenance to accelerate production

The production-volume variance may also be referred to as the:

denominator-level variance

Which of the following is an irrelevant cost?

depreciation

When deciding to accept a one-‐‑ time -‐‑only special order from a wholesaler, management should ________.

determine whether excess capacity is available

Absorption costing is required for all of the following except:

determining a competitive selling price

Book value is defined as the ________.

difference between the original cost of an asset and the accumulated depreciation

The theory of constraints (TOC) defines throughput margin as ________

revenues minus the direct material costs of the goods sold

The variance that LEAST affects cost control is the:

sales-volume variance

Which of the following is an appropriate step when identifying relevant costs to make a business decision?

separating total costs into variable and fixed components

The variable overhead flexible-budget variance can be further subdivided into the:

spending variance and the efficiency variance

In a standard costing system, a cost-allocation base would most likely be:

standard machine-hours

In product-‐‑mix decisions, managers should ________.

always focus on maximizing total contribution margin

In linear programming, the goals of management are expressed in ________.

an objective function

A favorable efficiency variance for direct materials might indicate:

an overskilled workforce

Critics of absorption costing suggest to evaluate management on their ability to:

decrease inventory costs

A supplier offers to make Part A for $35. Altec Services Corporation has relevant costs of $40 a unit to manufacture 1,000 units of Part A. If there is excess capacity, the opportunity cost of buying P art A from the supplier is ________.

$0

Ratzlaff Company has a current production level of 20,000 units per month. Unit costs at this level are: Direct materials $0.25 Direct labor 0.40 Variable overhead 0.15 Fixed overhead 0.20 Marketing -‐‑ fixed 0.20 Marketing/distribution -‐‑ variable 0.40 Current monthly sales are 18,000 units. Jim Company has contacted Ratzlaff Company about purchasing 1,500 units at $2.00 each. Current sales would NOT be affected by the one -‐‑time -‐‑only special order, and variable marketing/distribution costs would NOT be incurred on the special order. What is Ratzlaff Company'ʹs change in operating profits if the special order is accepted?

$1 ,800 increase in operating profits

What is the variable overhead efficiency variance?

$1,000 favorable

July's direct material price variance is:

$1,100 favorable

Contrafic'ʹs Kitchens is approached by Mr. Louis Cifer, a new customer, to fulfill a large one -‐‑time-‐‑only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers: Direct materials $546 Direct labor 360 Variable manufacturing support 54 Fixed manufacturing support 120 Total manufacturing costs 1,080 Markup (60%) 648 Targeted selling price $1,728 Contrafic'ʹs Kitchens has excess capacity. Mr. Cifer wants the cabinets in cherry rather than oak, so direct material costs will increase by $60 per unit. The average market ing cost of Contrafic'ʹs Kitchens is $180 per order. 30) For Contrafic'ʹs Kitchens, what is the full cost of the one -‐‑time -‐‑only special order?

$1,140

The flexible-budget variance is:

$1,200 favorable

Calculate the flexible-budget variance for variable setup overhead costs.

$1,300 favorable

Diana Industries, Inc. (DII), developed standard costs for direct material and direct labor. In 2010, DII estimated the following standard costs for one of their major products, the 10-gallon plastic container. Budgeted quantity Budgeted price Direct materials 0.10 pounds $30 per pound Direct labor 0.05 hours $15 per hour During June, DII produced and sold 10,000 containers using 980 pounds of direct materials at an average cost per pound of $32 and 500 direct manufacturing labor-hours at an average wage of $15.25 per hour. 7) June's direct material flexible-budget variance is:

$1,360 unfavorable

When deciding to lease a new cutting machine or continue using the old machine, the irrelevant cost is ________.

$50,000, cost of the old machine

When continuous improvement budgeted costing is implemented, cost reductions can result from:

All of these answers are correct.

________ method(s) expense(s) direct material costs as cost of goods sold.

All of these answers are correct.

________ method(s) expense(s) variable marketing costs in the period incurred.

All of these answers are correct.

What is the flexible-budget variance for variable manufacturing overhead?

$2,250 favorable

Should Rubium make or buy the subassemblies? What is the difference between the two alternatives?

Make; savings = $25,000

Sawyer Industries, Inc. (SII), developed standard costs for direct material and direct labor. In 2011, SII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container. Budgeted quantity Budgeted price Direct materials 0.20 pounds $25 per pound Direct labor 0.10 hours $15 per hour During July, SII produced and sold 5,000 containers using 1,100 pounds of direct materials at an average cost per pound of $24 and 525 direct manufacturing labor hours at an average wage of $14.75 per hour. 11) July's direct material flexible-budget variance is:

$1,400 unfavorable

Fixed manufacturing costs included in ending inventory total:

$1,800

Under absorption costing, the production-volume variance is:

$1,800

Operating income using absorption costing will be ________ than operating income if using variable costing

$1,800 higher

Calculate the production-volume variance for fixed setup overhead costs.

$1,800 unfavorable

Munoz, Inc., produces a special line of plastic toy racing cars. Munoz, Inc., produces the cars in batches. To manufacture a batch of the cars, Munoz, Inc., must set up the machines and molds. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and molds for different styles of car. Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to June 2011: Actual Static-budget Amounts Amounts Units produced and sold 15,000 11,250 Batch size (number of units per batch) 250 225 Setup-hours per batch 5 5.25 Variable overhead cost per setup-hour $40 $38 Total fixed setup overhead costs $12,000 $9,975 1) Calculate the efficiency variance for variable setup overhead costs

$1,900 favorable

June's direct material price variance is:

$1,960 unfavorable

What is the total static-budget variance?

$10,400 favorable

A recent college graduate has the choice of buying a new car for $33,500 or investing the money for four years with an 8% expected annual rate of return. He has an investment of $40,000 in equities and bonds which yields 6% expected annual rate of return. If the gr aduate decides to purchase the car, the best estimate of the opportunity cost of that decision is ________.

$10,720

Goldfarb Company produces a specialty item. Management has provided the following information: Actual sales 110,000 units Budgeted production 100,000 units Selling price $40.00 per unit Direct material costs $10.00 per unit Variable manufacturing overhead $3.00 per unit Variable administrative costs $5.00 per unit Fixed manufacturing overhead $4.00 per unit 10) What is the cost per statue if throughput costing is used?

$10.00

Willis Corporation manufactures industrial-sized gas furnaces and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 30,000 units Budgeted machine-hours 10,000 hours Budgeted variable manufacturing overhead costs for 15,000 units $322,500 Actual output units produced 44,000 units Actual machine-hours used 14,400 hours Actual variable manufacturing overhead costs $484,000 6) What is the budgeted variable overhead cost rate per output unit?

$10.75

In a 3-variance analysis the spending variance should be:

$11,000 U

What is the flexible-budget variance for variable manufacturing overhead?

$11,000 unfavorable

Calculate the flexible-budget variance for variable setup overhead costs.

$114 unfavorable

What is the static-budget variance of operating income?

$12,000 favorable

Jenny's Corporation manufactured 25,000 grooming kits for horses during March. The fixed-overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March: Actual Static Budget Production 25,000 units 24,000 units Machine-hours 6,100 hours 6,000 hours Fixed overhead costs for March $123,000 $120,000 6) What is the flexible-budget amount?

$120,000

In a 1-variance analysis the total overhead variance should be:

$121,000 U

June's direct manufacturing labor price variance is:

$125 unfavorable

What is the amount of fixed overhead allocated to production?

$125,000

Fearless Frank's Fertilizer Farm produces fertilizer and distributes the product by using his tanker trucks. Frank's uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 600 truckloads Budgeted fleet hours 450 hours Budgeted pounds of fertilizer 24,000,000 pounds Budgeted variable manufacturing overhead costs for 600 loads $75,000 Actual output units produced and delivered 630 truckloads Actual fleet hours 436 hours Actual pounds of fertilizer produced and delivered 25,200,000 pounds Actual variable manufacturing overhead costs $76,500 8) What is the budgeted variable overhead cost rate per output unit?

$125.00

If the travel book line had been discontinued, corporate profits for the current year would have decreased by ________.

$13,000

What is the static-budget variance of operating income?

$13,100 favorable

July's direct manufacturing labor price variance is:

$131.25 favorable

Black Forrest manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $180 per table, consisting of 80% variable costs and 20% fixed costs. The company has surplus capacity available. It is Back Forrest'ʹs policy to add a 50% markup to full costs. 34) Black Forrest is invited to bid on a one -‐‑time -‐‑only special order to supply 100 rustic tables. What is the lowest price Black Forrest should bid on this special order?

$14,400

What is the variable overhead efficiency variance?

$3,937.50 favorable

What is the variable overhead spending variance?

$3,937.50 favorable

Zephram Corporation has a plant capacity of 200,000 units per month. Unit costs at capacity are: Direct materials $4.00 Direct labor 6.00 Variable overhead 3.00 Fixed overhead 1.00 Marketing —fixed 7.00 Marketing/distribution —variable 3.60 Curr ent monthly sales are 190,000 units at $30.00 each. Q, Inc., has contacted Zephram Corporation about purchasing 2,000 units at $24.00 each. Current sales would not be affected by the one -‐‑time -‐‑only special order. What is Zephram'ʹs change in operating profit s if the one -‐‑time -‐‑only special order is accepted?

$14,800 increase

Heston Company has the following information for the current year: Beginning fixed manufacturing overhead in inventory $190,000 Fixed manufacturing overhead in production 750,000 Ending fixed manufacturing overhead in inventory 50,000 Beginning variable manufacturing overhead in inventory $20,000 Variable manufacturing overhead in production 100,000 Ending variable manufacturing overhead in inventory 30,000 What is the difference between operating incomes under absorption costing and variable costing?

$140,000

The following information pertains to Brian Stone Corporation: Beginning fixed manufacturing overhead in inventory $60,000 Ending fixed manufacturing overhead in inventory 45,000 Beginning variable manufacturing overhead in inventory $30,000 Ending variable manufacturing overhead in inventory 14,250 Fixed selling and administrative costs $724,000 Units produced 5,000 units Units sold 4,800 units What is the difference between operating incomes under absorption costing and variable costing?

$15,000

What is the static-budget variance of variable costs?

$15,000 unfavorable

Lukehart Industries, Inc., produces air purifiers. Lukehart, Inc., produces the air purifiers in batches. To manufacture a batch of the purifiers, Lukehart, Inc., must set up the machines and assembly line tooling. Setup costs are batch-level costs because they are associated with batches rather than individual units of products. A separate Setup Department is responsible for setting up machines and tooling for different models of the air purifiers. Setup overhead costs consist of some costs that are variable and some costs that are fixed with respect to the number of setup-hours. The following information pertains to June 2011: Budget Actual Amounts Amounts Units produced and sold 10,000 9,000 Batch size (number of units per batch) 400 375 Setup-hours per batch 6 5.5 Variable overhead cost per setup-hour $50 $52 Total fixed setup overhead costs $18,000 $17,750 6) Calculate the efficiency variance for variable setup overhead costs.

$150 favorable

Direct materials are $600, direct labor is $150, variable overhead costs are $450, and fixed overhead costs are $300. The cost of one unit is ________.

$1500

What is the flexible-budget amount?

$151,875

The flexible-budget variance for variable costs is:

$16,000 unfavorable

What is the variable overhead efficiency variance?

$16,875 unfavorable

Christine Corporation manufactures baseball uniforms and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 10,000 units Budgeted machine-hours 15,000 hours Budgeted variable manufacturing overhead costs for 20,000 units $180,000 Actual output units produced 9,000 units Actual machine-hours used 14,000 hours Actual variable manufacturing overhead costs $171,000 6) What is the flexible-budget amount for variable manufacturing overhead?

$162,000

JJ Abrams planned to use $164 of material per unit but actually used $160 of material per unit, and planned to make 1,200 units but actually made 1,000 units. 12) The flexible-budget amount is:

$164,000

Manash 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 450,000 450,000 412,500 Revenues $168,320 $4,000 F (A) $5,600 U (B) Variable costs (C) $800 U $63,440 $9,360 F $72,800 Fixed costs $33,120 $3,440 F $36,560 0 $36,560 Operating income $70,960 (D) $64,320 (E) $60,560 6) What amounts are reported for revenues in the flexible-budget (A) and the static-budget (B), respectively?

$164,320; $169,920

Roberson Corporation manufactured 30,000 ice chests during September. The overhead cost-allocation base is $11.25 per machine-hour. The following variable overhead data pertain to September: Actual Budgeted Production 30,000 units 24,000 units Machine-hours 15,000 hours 10,800 hours Variable overhead cost per machine-hour: $11.00 $11.25 25) What is the actual variable overhead cost?

$165,000

What is the static-budget variance of operating income?

$165,000 favorable

The difference between keeping the old machine and replacing the old machine is ________.

$168,000 in favor of keeping the old machine

Christine Corporation manufactures baseball uniforms and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 10,000 units Budgeted machine-hours 15,000 hours Budgeted variable manufacturing overhead costs for 20,000 units $180,000 Actual output units produced 9,000 units Actual machine-hours used 14,000 hours Actual variable manufacturing overhead costs $171,000 7) What is the budgeted variable overhead cost rate per output unit?

$18.00

The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department of Wooden Figurines Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results. Actual Flexible Static Results Budget Budget Sales volume (in units) 13,000 12,000 Sales revenues $257,500 $ $250,000 Variable costs 154,000 $ ________ 175,000 Contribution margin 103,500 $ 75,000 Fixed costs 50,500 $ ________ 49,500 Operating profit $ 53,000 $ $ 25,500 2) The flexible budget will report ________ for variable costs.

$189,583

Hector's Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. Flexible Variances Budget Price Efficiency Material A $20,000 $1,000U $1,200F Material B 30,000 500F 800U Material C 40,000 1,400U 1,000F 31) The actual amount spent for Material A was:

$19,800

What is the flexible-budget amount?

$50,000

Brown Corporation manufactured 3,000 chairs during June. The following variable overhead data pertain to June: Budgeted variable overhead cost per unit $ 12.00 Actual variable manufacturing overhead cost $33,600 Flexible-budget amount for variable manufacturing overhead $36,000 Variable manufacturing overhead efficiency variance $720 unfavorable 17) What is the variable overhead flexible-budget variance?

$2,400 favorable

The flexible-budget variance is:

$2,400 unfavorable

What is the variable overhead spending variance?

$2,450 unfavorable

July's direct material efficiency variance is:

$2,500 unfavorable

Genent'ʹs Preserves currently makes jams and jellies and a variety of decorative jars used for packaging. An outside supplier has offered to supply all of the needed decorative jars. For this make -‐‑or-‐‑buy decision, a cost analysis revealed the following avoida ble unit costs for the decorative jars: Direct materials $0.50 Direct labor 0.06 Unit -‐‑related support costs 0.20 Batch-‐‑ related support costs 0.24 Product -‐‑sustaining support costs 0.44 Facility -‐‑sustaining support costs 0.56 Total cost per jar $2.00 7) The relevant cost per jar is ________.

$2.00 per jar

Th e maximum price that Genent'ʹs Preserves should be willing to pay for the decorative jars is ________.

$2.00 per jar

Peggy's Pillows produces and sells a decorative pillow for $75.00 per unit. In the first month of operation, 2,000 units were produced and 1,750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: Variable manufacturing costs $20.00 per unit Variable marketing costs $ 3.00 per unit Fixed manufacturing costs $ 7.00 per unit Administrative expenses, all fixed$15.00 per unit Ending inventories: Direct materials -0- WIP -0- Finished goods 250 units 7) What is cost of goods sold per unit using variable costing?

$20

Bowden Corporation used the following data to evaluate their current operating system. The company sells items for $20 each and used a budgeted selling price of $20 per unit. Actual Budgeted Units sold 46,000 units 45,000 units Variable costs $225,400 $216,000 Fixed costs $47,500 $50,000 7) What is the static-budget variance of revenues?

$20,000 favorable

What is the amount of fixed overhead allocated to production?

$200,000

What is the change in operating profits if the one -‐‑time -‐‑only special order for 1,000 units is accepted for $540 a unit by Coroid?

$210,000 increase in operating profits

September's direct labor flexible-budget variance is:

$210.00 favorable

The flexible budget will report ________ for the fixed costs.

$225,000

Gus Corporation manufactured 10,000 golf bags during April. The fixed overhead cost-allocation rate is $40.00 per machine-hour. The following fixed overhead data pertain to March: Actual Static Budget Production 10,000 units 12,000 units Machine-hours 5,100 hours 6,000 hours Fixed overhead cost for March $244,000 $240,000 12) What is the flexible-budget amount?

$240,000

The actual information pertains to the month of September. As part of the budgeting process, Kriger Fencing Company developed the following static budget for September. Kriger is in the process of preparing the flexible budget and understanding the results. Actual Flexible Static Results Budget Budget Sales volume (in units) 10,000 12,500 Sales revenues $500,000 $ $625,000 Variable costs 256,000 $ ________ 300,000 Contribution margin 244,000 $ 325,000 Fixed costs 229,000 $ ________ 225,000 Operating profit $ 15,000 $ $ 100,000 23) The flexible budget will report ________ for variable costs.

$240,000

July's direct manufacturing labor flexible-budget variance is:

$243.75 unfavorable

Russo Corporation manufactured 16,000 air conditioners during November. The overhead costallocation base is $31.50 per machine-hour. The following variable overhead data pertain to November: Actual Budgeted Production 16,000 units 18,000 units Machine-hours 7,875 hours 9,000 hours Variable overhead cost per machine-hour: $31.00 $31.50 29) What is the actual variable overhead cost?

$244,125

Altec Services Corporation has relevant costs of $40 per unit to manufacture 1,000 units of Part A. A current supplier offers to make Part A for $35 per unit. Alternatively, the company can rent out the capacity for $25,000. If capacity is constrained, the opportunity cost of buying Part A from the supplier is ________.

$25,000

Calculate the spending variance for fixed setup overhead costs.

$250 favorable

What is the static-budget variance of variable costs?

$250,000 favorable

What is the flexible-budget amount?

$252,000

Calculate the spending variance for variable setup overhead costs.

$264 unfavorable

A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style. Black Forrest Incorporated is invited to sub mit a bid to the hotel chain. What is the lowest price per unit Black Forrest should bid on this long-‐‑ term order?

$270

September's direct labor efficiency variance is:

$280.00 favorable

A segment has the following data: Sales $630,000 Variable costs 336,000 Fixed costs 325,500 What will be the incremental effect on net income if this segment is eliminated, assuming the fixed costs will be allocated to profitable segments?

$294,000 decrease

The production-volume variance is:

$3,000

What is the fixed overhead spending variance?

$3,000 unfavorable

What is the variable overhead spending variance?

$3,120 favorable

What is the total throughput contribution?

$3,300,000

What is the variable overhead spending variance?

$3,750 favorable

What is the total sales-volume variance (E)?

$3,760 favorable

Everclean Filter Corporation used the following data to evaluate their current operating system. The company sells items for $10 each and had used a budgeted selling price of $11 per unit. Actual Budgeted Units sold 306,000 units 300,000 units Variable costs $965,000 $950,000 Fixed costs $ 53,000 $ 50,000 13) What is the static-budget variance of revenues?

$30,000 favorable

Bebee Corporation currently produces cardboard boxes in an automated process. Expected production per month is 40,000 units, direct-material costs are $0.60 per unit, and manufacturing overhead costs are $18,000 per month. Manufacturing overhead is all fixed costs. What is the flexible budget for 20,000 and 40,000 units, respectively?

$30,000; $42,000

The actual amount spent for Material B was:

$30,300

Kory's Auto produces and sells an auto part for $60.00 per unit. In 2011, 100,000 parts were produced and 75,000 units were sold. Other information for the year includes: Direct materials $24.00 per unit Direct manufacturing labor $ 4.50 per unit Variable manufacturing costs $ 1.50 per unit Sales commissions $ 6.00 per part Fixed manufacturing costs $750,000 per year Administrative expenses, all fixed $270,000 per year 16) What is the inventoriable cost per unit using variable costing?

$30.00

The sales-volume variance is:

$32,800 unfavorable

What is operating income when using absorption costing?

$33,000

For Coroid Manufacturers Inc., what is the minimum acceptable price of this special order?

$330

Assuming no other use of their facilities, the highest price that Piels should be willing to pay for 10,000 units of the part is ________.

$340,000

Gloria's Decorating produces and sells a mantel clock for $80 per unit. In 2011, 50,000 clocks were produced and 40,000 were sold. Other information for the year includes: Direct materials $30.00 per unit Direct manufacturing labor $ 2.00 per unit Variable manufacturing costs $ 3.00 per unit Sales commissions $ 5.00 per part Fixed manufacturing costs $25.00 per unit Administrative expenses, all fixed $15.00 per unit 14) What is the inventoriable cost per unit using variable costing?

$35

What is cost of goods sold using variable costing?

$35,000

The flexible-budget variance for variable costs is:

$35,583 favorable

What is the inventoriable cost per unit using absorption costing?

$37.50

July's direct manufacturing labor efficiency variance is:

$375.00 unfavorable

Luke's Football Manufacturing Company reported: Actual fixed overhead $400,000 Fixed manufacturing overhead spending variance $10,000 favorable Fixed manufacturing production-volume variance $15,000 unfavorable To isolate these variances at the end of the accounting period, John would debit Fixed Manufacturing Overhead Allocated for:

$395,000

The flexible-budget variance is:

$4,000 favorable

What is the fixed overhead spending variance?

$4,100 favorable

Calculate the production-volume variance for fixed setup overhead costs.

$4,666.67 favorable

Gus Corporation manufactured 10,000 golf bags during April. The fixed overhead cost-allocation rate is $40.00 per machine-hour. The following fixed overhead data pertain to March: Actual Static Budget Production 10,000 units 12,000 units Machine-hours 5,100 hours 6,000 hours Fixed overhead cost for March $244,000 $240,000 3) What is the fixed overhead production-volume variance?

$40,000 unfavorable

Calculate the spending variance for fixed setup overhead costs.

$400 unfavorable

In a 2-variance analysis the flexible-budget variance and the production-volume variance should be ________, respectively.

$41,000 U; $80,000 U

What is the contribution margin per unit?

$435

Operating income using absorption costing will be ________ operating income if using variable costing.

$450 higher than

What is the total throughput contribution?

$450,000

September's direct material price variance is:

$468.75 favorable

What is operating income using variable costing?

$47,000

Willis Corporation manufactures industrial-sized gas furnaces and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 30,000 units Budgeted machine-hours 10,000 hours Budgeted variable manufacturing overhead costs for 15,000 units $322,500 Actual output units produced 44,000 units Actual machine-hours used 14,400 hours Actual variable manufacturing overhead costs $484,000 3) What is the flexible-budget amount for variable manufacturing overhead?

$473,000

The flexible budget will report ________ for the fixed costs.

$49,500

What is gross margin when using absorption costing?

$49,500

For the decision to keep the old machine, the relevant costs of keeping the old machine is ________

$490,000

Jenny's Corporation manufactured 25,000 grooming kits for horses during March. The fixed-overhead cost-allocation rate is $20.00 per machine-hour. The following fixed overhead data pertain to March: Actual Static Budget Production 25,000 units 24,000 units Machine-hours 6,100 hours 6,000 hours Fixed overhead costs for March $123,000 $120,000 2) What is the fixed overhead production-volume variance?

$5,000 favorable

Russert Company produces wood statues. Management has provided the following information: Actual sales 30,000 statues Budgeted production 50,000 statues Selling price $20.00 per statue Direct material costs $5.00 per statue Variable manufacturing costs $1.50 per statue Variable administrative costs $2.50 per statue Fixed manufacturing overhead $2.00 per statue 8) What is the cost per statue if throughput costing is used?

$5.00

Roberts Corporation manufactured 100,000 buckets during February. The overhead cost-allocation base is $5.00 per machine-hour. The following variable overhead data pertain to February: Actual Budgeted Production 100,000 units 100,000 units Machine-hours 9,800 hours 10,000 hours Variable overhead cost per machine-hour $5.25 $5.00 21) What is the actual variable overhead cost?

$51,450

What is the amount of fixed overhead allocated to production?

$51,750

Coroid Manufacturers Inc. is approached by a European customer to fulfill a one -‐‑time -‐‑only special order for a product similar to one offered to domestic custome rs. The company has excess capacity. The following per unit data apply for sales to regular customers: Variable costs: Direct materials $120 Direct labor 60 Manufacturing support 105 Marketing costs 45 Fixed costs: Manufacturing support 135 Market ing costs 45 Total costs 510 Markup (50%) 255 Targeted selling price $765 24) What is the full cost of the product per unit?

$510

Jeremy's Football Manufacturing Company reported: Actual fixed overhead $500,000 Fixed manufacturing overhead spending variance $30,000 favorable Fixed manufacturing production-volume variance $20,000 unfavorable To isolate these variances at the end of the accounting period, Jeremy would debit Fixed Manufacturing Overhead Allocated for:

$510,000

September's direct material efficiency variance is:

$543.75 unfavorable

Rutch Corporation manufactured 54,000 door jambs during September. The fixed-overhead costallocation rate is $50.00 per machine-hour. The following fixed overhead data pertain to September: Actual Static Budget Production 54,000 units 60,000 units Machine-hours 985 hours 1,150 hours Fixed overhead costs for September $53,400 $57,500 9) What is the flexible-budget amount?

$57,500

Brennen Incorporated planned to use $24 of material per unit but actually used $25 of material per unit, and planned to make 2,000 units but actually made 2,400 units. 16) The flexible-budget amount is:

$57,600

Barry's Hobbies produces and sells a luxury animal pillow for $80.00 per unit. In the first month of operation, 3,000 units were produced and 2,250 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: Variable manufacturing costs $38 per unit Variable marketing costs $ 2 per unit Fixed manufacturing costs $60,000 per month Administrative expenses, all fixed $12,000 per month Ending inventories: Direct materials -0- WIP -0- Finished goods 750 units 11) What is cost of goods sold per unit when using absorption costing?

$58

The actual amount spent for Material B was:

$59,000

Helmer'ʹs Rockers manufactures two models, Standard and Premium. Weekly demand is estimated to be 100 units of the Standard Model and 70 units of the Premium Model. The following per unit data apply: Standard Premium Contribution margin per unit $18 $20 Number of machine -‐‑hours required 3 4 12) The contribution per machine-‐‑ hour is ________.

$6 for Standard, $5 for Premium

Veach Corporation incurred fixed manufacturing costs of $6,000 during 2011. Other information for 2011 includes: The budgeted denominator level is 1,000 units. Units produced total 750 units. Units sold total 600 units. Beginning inventory was zero. The company uses variable costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold. 26) Fixed manufacturing costs expensed on the income statement (excluding adjustments for variances) total:

$6,000

What is the total flexible-budget variance (D)?

$6,640 favorable

Aurum Appliances manufactures three sizes of kitchen appliances: small, medium, and large. Product information is provided below. Small Medium Large Unit selling price $400 $600 $1,200 Unit costs: Variable manufacturing (220) (280) (500) Fixed manufacturing (80) (130) (240) Fixed selling and administrative (60) (75) (120) Unit profit $ 40 $ 115 $340 Demand in units 100 120 100 Machine -‐‑hours pe r unit 20 40 100 The maximum machine-‐‑ hours available are 6,000 per week. 15) What is the contribution margin per machine -‐‑hour for a medium appliance?

$6.13

What is the inventoriable cost per unit using absorption costing?

$60

Melville Incorporated planned to use $37.50 of material per unit but actually used $36.75 of material per unit, and planned to make 1,800 units but actually made 1,600 units. 19) The flexible-budget amount is:

$60,000

Caan Corporation used the following data to evaluate their current operating system. The company sells items for $20 each and used a budgeted selling price of $20 per unit. Actual Budgeted Units sold 200,000 units 203,000 units Variable costs $1,250,000 $1,500,000 Fixed costs $ 925,000 $ 900,000 10) What is the static-budget variance of revenues?

$60,000 unfavorable

Diana Industries, Inc. (DII), developed standard costs for direct material and direct labor. In 2010, DII estimated the following standard costs for one of their major products, the 10-gallon plastic container. Budgeted quantity Budgeted price Direct materials 0.10 pounds $30 per pound Direct labor 0.05 hours $15 per hour During June, DII produced and sold 10,000 containers using 980 pounds of direct materials at an average cost per pound of $32 and 500 direct manufacturing labor-hours at an average wage of $15.25 per hour. 8) June's direct material efficiency variance is:

$600 favorable

Patel Corporation manufactured 1,000 coolers during October. The following variable overhead data pertain to October: Budgeted variable overhead cost per unit $ 9.00 Actual variable manufacturing overhead cost $8,400 Flexible-budget amount for variable manufacturing overhead $9,000 Variable manufacturing overhead efficiency variance $180 unfavorable 19) What is the variable overhead flexible-budget variance?

$600 favorable

A flexible-budget variance is $600 favorable for unit-related costs. This indicates that costs were:

$600 less than standard for the achieved level of activity

Calculate the spending variance for variable setup overhead costs.

$600 unfavorable

What are the actual variable costs (C)?

$64,240

A purchasing manager's performance is best evaluated using the:

affect the manager's action has on total costs for the entire company

Rubium Micro Devices currently manufactures a subassembly for its main product. The costs per unit are as follows: Direct materials $ 45.00 Direct labor 35.00 Variable overhead 33.00 Fixed overhead 30.00 Total $143.00 Crayola Technologies Inc. has contacted Rubium with an offer to sell 5,000 of the subassemblies for $135.00 each. Rubium will eliminate $85,000 of fixed overhead if it accepts the proposal. 23) What are the relevant costs for Rubium?

$650,000

Stiller Corporation incurred fixed manufacturing costs of $12,000 during 2011. Other information for 2011 includes: The budgeted denominator level is 2,000 units. Units produced total 1,500 units. Units sold total 1,200 units. Beginning inventory was zero. The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold. 22) Fixed manufacturing costs expensed on the income statement (excluding adjustments for variances) total:

$7,200

Under variable costing, the fixed manufacturing costs expensed on the income statement (excluding adjustments for variances) total:

$7,200

The sales-volume variance is:

$7,500 unfavorable

What is the total variable overhead variance

$7,875 favorable

September's direct labor price variance is:

$70.00 unfavorable

Apple Valley Orchards, Inc. (AVO), developed standard costs for direct material and direct labor. In 2011, AVO estimated the following standard costs for one of their most well loved products, the AVO classic Grandma's large apple pie which had a brown sugar coating on the top of the crust as well as including cranberry and mince ingredients in addition to the apples. Budgeted quantity Budgeted price Direct materials 1.5 pounds $7.25 per pound Direct labor 0.25 hours $14.00 per hour During September, AVO produced and sold 1,200 pies using 1,875 pounds of direct materials at an average cost per pound of $7.00 and 280 direct labor hours at an average wage of $14.25 per hour. 17) September's direct material flexible-budget variance is:

$75.00 unfavorable

Hemberger Corporation currently produces baseball caps in an automated process. Expected production per month is 20,000 units, direct material costs are $3.00 per unit, and manufacturing overhead costs are $46,000 per month. Manufacturing overhead is entirely fixed costs. What is the flexible budget for 10,000 and 20,000 units, respectively?

$76,000; $106,000

The actual amount spent for direct manufacturing labor was:

$78,000

Fearless Frank's Fertilizer Farm produces fertilizer and distributes the product by using his tanker trucks. Frank's uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 600 truckloads Budgeted fleet hours 450 hours Budgeted pounds of fertilizer 24,000,000 pounds Budgeted variable manufacturing overhead costs for 600 loads $75,000 Actual output units produced and delivered 630 truckloads Actual fleet hours 436 hours Actual pounds of fertilizer produced and delivered 25,200,000 pounds Actual variable manufacturing overhead costs $76,500 9) What is the flexible-budget amount for variable manufacturing overhead?

$78,750

What is the variable overhead spending variance?

$780 favorable

Tunney Corporation incurred fixed manufacturing costs of $7,200 during 2011. Other information for 2011 includes: The budgeted denominator level is 1,600 units. Units produced total 2,000 units. Units sold total 1,900 units. Beginning inventory was zero. The fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold. 30) Under absorption costing, fixed manufacturing costs expensed on the income statement (excluding adjustments for variances) total:

$8,550

What is the flexible-budget variance for variable manufacturing overhead?

$9,000 unfavorable

What is the static-budget variance of variable costs?

$9,400 unfavorable

The sales-volume variance is:

$9,600 favorable

Operating income using variable costing will be ________ than operating income if using absorption costing.

$900 lower

What is contribution margin using variable costing?

$91,000

Genent'ʹs Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows: Direct materials $46,000 Direct labor 11,500 Variable overhead costs 34,500 Fixed overhead costs 23,000 Tot al costs $115,000 It is estimated that 8% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Genent'ʹs Engine Company has the option of purchasing the part from an outside supplier at $97.75 per unit. 13) If Genent'ʹs Engine Company accepts the offer from the outside supplier, the monthly avoidable costs (costs that will no longer be incurred) total ________.

$93,840

The maximum price that Genent'ʹs Engine Company should be willing to pay the outside supplier is ________.

$93.84 per TE456 part

Fixed manufacturing costs included in ending inventory total:

0

The production-volume variance totals:

0

Greene Manufacturing incurred the following expenses during 2011: Fixed manufacturing costs $45,000 Fixed nonmanufacturing costs $35,000 Unit selling price $100 Total unit cost $40 Variable manufacturing cost rate $20 Units produced 1,340 units 6) What will be the breakeven point if variable costing is used?

1,000 units

What is the absorption costing breakeven point in units?

1,000 units

What is the practical capacity for the month of April?

1,036,800 units

A manufacturing firm is able to produce 2,000 pairs of sneakers per hour, at maximum efficiency. There are three eight-hour shifts each day. Due to unavoidable operating interruptions, production averages 1,600 units per hour. The plant actually operates only 27 days per month. 11) What is the theoretical capacity for the month of April?

1,440,000 units

Favata Corporatio n manufactures two products, AA and CC. The following information was available: AA CC Selling price per unit $37 $26 Variable cost per unit 32 22 Total fixed costs $18,000 If Favata Corporation could produce and sell either 10,000 units of AA or 5,000 units of CC at full capacity, it should produce and sell ________.

10,000 units of AA and none of CC

If there are 496 machine -‐‑hours available per week, how many rockers of each model should Jim Helmer produce to maximize profits?

100 units of Standard and 49 units of Premium

If there are 600 machine -‐‑hours available per week, how many rockers of each model should Jim Helmer produce to maximize profits?

100 units of Standard and 70 units of Premium

Ms. Janice Meyers, the company president, has heard that there are multiple breakeven points for every product. She does not believe this and has asked you to provide the evidence of such a possibility. Some information about the company for 2011 is as follows: Total fixed manufacturing overhead $180,000 Total other fixed expenses $200,000 Total variable manufacturing expenses $240,000 Total other variable expenses $240,000 Units produced 60,000 units Budgeted production 60,000 units Units sold 50,000 units Selling price $40 1) What are breakeven sales in units using variable costing?

11,875 units

Bosely Corporation is in the business of selling computers. The following expenses were incurred in March 2011: Fixed manufacturing costs $75,000 Fixed nonmanufacturing costs $35,000 Unit selling price $1,200 Variable manufacturing cost $700 Units produced 1,500 What will be the breakeven point if variable costing is used?

220 units

ProductionVariances Spending Efficiency Volume Variable manufacturing overhead $ 9,000 F $30,000 U (B) Fixed manufacturing overhead $20,000 U (A) $80,000 U 15) Above is a:

4-variance analysis

What is the breakeven point in units using absorption costing if the units produced are actually 2,250?

584 units

The following information pertains to the Bean Company: Selling price per unit $123 Standard fixed manufacturing costs per unit $60 Variable selling and administrative costs per unit $12 Standard variable manufacturing costs per unit $3 Fixed selling and administrative costs $48,000 Units produced 10,000 units Units sold 9,600 units 4) What is the variable costing breakeven point in units?

6,000 units

What are breakeven sales in units using absorption costing?

6,897 units

How many of each product should be produced per month using the short-‐‑run profit maximizing strategy?

60 120 0

What are breakeven sales in units using absorption costing if the production units are actually 25,000?

7,931 units

What will be the breakeven point in units if absorption costing is used?

887 units

Sanchez Company made the following journal entry: Variable Manufacturing Overhead Allocated 200,000 Variable Manufacturing Overhead Efficiency Variance60,000 Variable Manufacturing Overhead Control 250,000 Variable Manufacturing Overhead Spending Variance 10,000

A $10,000 favorable spending variance was recorded.

Tara Company makes the following journal entry: Variable Manufacturing Overhead Allocated 200,000 Variable Manufacturing Overhead Efficiency Variance5,000 Variable Manufacturing Overhead Control 175,000 Variable Manufacturing Overhead Spending Variance 30,000

A $25,000 favorable flexible-budget variance was recorded.

Place the following steps from the five-step decision process in order: A = Make predictions about future costs B = Evaluate performance to provide feedback C = Implement the decision D = Choose an alternative

A D C B

________ method(s) include(s) fixed manufacturing overhead costs as inventoriable costs.

Absorption costing

________ method(s) is required for tax reporting purposes.

Absorption costing

Which of the following is an assumption of linear programming?

All costs are either variable or fixed for a single cost driver.

Which of the following is NOT a step in developing budgeted fixed overhead rates?

All of the above are steps in developing budgeted fixed overhead rates.

A standard input:

All of these answers are correct.

Advocates of throughput costing argue that:

All of these answers are correct.

An unfavorable sales-volume variance could result from:

All of these answers are correct.

Budgeted input quantity information may be obtained from:

All of these answers are correct.

Ensuring benchmark numbers are comparable can be difficult because differences can exist across companies with:

All of these answers are correct.

Feedback regarding previous actions may affect:

All of these answers are correct.

For calculating the costs of products and services, a standard costing system:

All of these answers are correct.

Managers face uncertainty when estimating:

All of these answers are correct.

Standard costing systems are a useful tool when using:

All of these answers are correct.

Theoretical capacity:

All of these answers are correct.

To discourage producing for inventory, management can:

All of these answers are correct.

Variable overhead costs:

All of these answers are correct.

Variance information regarding nonmanufacturing costs can be used to:

All of these answers are correct.

An unfavorable flexible-budget variance for variable costs may be the result of

Both A and B are correct.

Companies have recently been able to reduce inventory levels because:

Both A and B are correct.

Differences between absorption costing and variable costing are much smaller when a:

Both A and B are correct.

Variable overhead costs can be managed by:

Both A and B are correct.

________ are subtracted from sales to calculate contribution margin.

Both A and B are correct.

Fixed overhead costs must be unitized for:

Both A and C are correct.

Which of the following cost(s) are inventoried when using absorption costing?

Both A and C are correct.

________ are subtracted from sales to calculate gross margin.

Both A and C are correct.

Unused capacity:

Both B and C are correct.

________ is (are) based on the demand for the output of the plant

Both B and C are correct.

What should John do? What are his savings in the first year?

Buy the Grand Cherokee; $180

Chapter 11

Chapter 11

Chapter 7

Chapter 7

Chapter 8

Chapter 8

Chapter 9

Chapter 9

Which of the following is true of depreciation cost?

Depreciation cost on equipment is irrelevant in decision making because depreciation on equipment that has already been purchased is a past cost

________ is the continuing reduction in the demand for a company's products that occurs when competitor prices are NOT met.

Downward demand spiral

When using the five-step decision process, which one of the following steps should be done last?

Evaluation and feedback

Kristin's Basketball Manufacturing Company reported: Actual fixed overhead $800,000 Fixed manufacturing overhead spending variance $60,000 favorable Fixed manufacturing production-volume variance $40,000 favorable To isolate these variances at the end of the accounting period, Kristin would debit:

Fixed Manufacturing Overhead Allocated for $900,000

Full costs of a product are the sum of ________.

all variable and fixed costs in all the business functions of the value chain

What role does a trade -‐‑in allowance on old equipment play in a decision to retain or replace equipment?

It is relevant since it reduces the cost of the new equipment

Which of the following is true of an opportunity cost?

It is the income foregone by not using a resource in an alternative way

________ provides the lowest estimate of denominator-level capacity.

Master-budget capacity utilization

The explanation that lower-quality materials were purchased is most likely for:

Material B

Computer Products produces two keyboards, Regular and Special. Regular keyboards have a unit contribution margin of $128, and Special keyboards have a unit contribution margin of $720. The demand for Regulars exceeds Computer Product'ʹs production capacity, which is limited by available machine -‐‑ hours and direct manufacturing labor -‐‑hours. The maximum demand for Special keyboards is 80 per month. Management desires a product mix that will maximize the contribution toward fixed costs and profits. Direct manufacturing labor is limited to 1,600 hours a month and machine -‐‑hours are limited to 1,200 a month. The Regular keyboards require 20 hour s of labor and 8 machine -‐‑hours. Special keyboards require 34 labor -‐‑hours and 20 machine -‐‑hours. Let R represent Regular keyboards and S represent Special keyboards. The correct set of equations for the keyboard production process is ________.

Maximize : $128R + $720S Constraints: Labor -‐‑hours: 20R + 34S ≤ 1,600 Machine -‐‑hours: 8R + 20S ≤ 1,200 Special: S ≤ 80 S ≥ 0 Regular: R ≥ 0

If there is a machine breakdown, which model is the most profitable to produce?

Model X

Which model has the greatest contribution margin per machine -‐‑hour?

Model X

Dynondo'ʹs Brakes manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following per u nit data apply: Model X Model Y Model Z Selling price $50 $60 $70 Direct materials 6 6 6 Direct labor ($12 per hour) 12 12 24 Variable support costs ($4 per machine -‐‑hour) 4 8 8 Fixed support costs 10 10 10 7) Which model has the greatest contributi on margin per unit?

Model Y

If there is excess capacity, which model is the most profitable to produce?

Model Y

June's direct manufacturing labor efficiency variance is:

None of these answers are correct.

Theoretical capacity allows for:

None of these answers is correct.

Which of the following statements is FALSE?

Nonmanufacturing costs are expensed in the future under variable costing.

_______ is the level of capacity utilization that satisfies average customer demand over a period that includes seasonal, cyclical, and trend factors.

Normal capacity utilization

________ is based on the level of capacity utilization that satisfies average customer demand over periods generally longer than one year.

Normal capacity utilization

When using the five-step decision process, which one of the following steps should be done first?

Obtain information

Which of the following is true of relevant information?

Past costs are not relevant.

_______ reduces theoretical capacity for unavoidable operating interruptions.

Practical capacity

How can Lisa Dynondo encourage her salespeople to promote the more profitable model?

Provide higher sales commissions for items with the greatest contribution margin per constrained resource.

Ruttles Circuit Company manufactures circuit boards for other firms. Management is attempting to search for ways to reduce manufacturing labor costs and has received a proposal from a consulting company to rearrange the production floor next year. Using the information below regarding current operations and the new proposal, which of the following decisions should management accept? CurrentlyProposedRequired machine operators 4 3 Materials-handling workers 1.50 1.50 Employee average pay $10 per hour $12 per hour Hours worked per employee 2,100 2,000

Rearrange the production floor.

When evaluating a make-‐‑ or-‐‑buy decision, which of the following needs to be considered?

alternative uses of the production capacity

Fixed and variable cost variances can ________ be applied to activity-based costing systems.

always

________ is relevant in a decision to replace equipment

Salvage value

Which of the following is true in a decision to keep or replace existing equipment?

The disposal value of the old equipment is relevant.

Regier Company had planned for operating income of $10 million in the master budget but actually achieved operating income of only $7 million.

The static-budget variance for operating income is $3 million unfavorable

________ is the level of capacity based on producing at full efficiency all the time.

Theoretical capacity

Which of the following is true of historical costs?

They are useful for making future predictions

Favorable direct manufacturing labor efficiency variances are:

always credits

Unfavorable direct material price variances are:

always debits

Marshall Company uses a standard cost system. In April, $266,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $300,000. Which of the following variable manufacturing overhead entries would have been recorded for March?

Variable Manufacturing Overhead Control 266,000 Accounts Payable Control and other accounts 266,000

________ is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs and all fixed manufacturing costs are excluded.

Variable costing

________ is a method of inventory costing in which only variable manufacturing costs are included as inventoriable costs.

Variable costing

John'ʹs 8 -‐‑year -‐‑old Chevrolet Trail Blazer requires repairs estimated at $6,000 to make it roadworthy again. His wife, Sherry, suggested that he should buy a 5-‐‑ year -‐‑old used Jeep Grand Cherokee instead for $6,000 cash. Sherry estimated the following costs f or the two cars: Trail Blazer Grand Cherokee Acquisition cost $25,000 $6,000 Repairs $ 6,000 — Annual operating costs (Gas, maintenance, insurance) $ 2,280 $2,100 9) The cost NOT relevant for this decision is the ________.

acquisition costs of the trail blazer

A favorable variance indicates that:

actual revenues exceed budgeted revenues

All of the following are needed to prepare a flexible budget EXCEPT determining the:

actual selling price per unit

The variable overhead flexible-budget variance measures the difference between:

actual variable overhead costs and the static budget for variable overhead costs

Teddy Company uses a standard cost system. In May, $234,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $240,000. Which of the following variable manufacturing overhead entries would have been recorded for May?

Work-in-Process Control 240,000 Variable Manufacturing Overhead Allocated 240,000

Would you recommend the 50-cent price increase?

Yes, because operating profits increase.

Snapper Tool Company has a production capacity of 3,000 units per month, but current production is only 2,500 units. Total manufacturing costs are $60 per unit and marketing costs are $16 per unit. Doug Levy offers to purchase 500 units at $76 each for the next five months. Should Snapper accept the one -‐‑ time -‐‑only special order if only absorption -‐‑costing data are available?

Yes, since operating profits will most likely increase.

In the above chart, the amounts for (A) and (B), respectively, are:

Zero; Zero

When machine-hours are used as an overhead cost-allocation base, the most likely cause of a favorable variable overhead spending variance is:

a decline in the cost of energy

Berman's Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. Flexible Variances Budget Price Efficiency Material A $40,000 $1,000F $3,000U Material B 60,000 500U 1,500F Direct manufacturing labor80,000 500U 2,500F 27) The most likely explanation of the above variances for Material A is that:

a lower price than expected was paid for Material A

A favorable price variance for direct materials indicates that:

a lower price than planned was paid for materials

When machine-hours are used as a cost-allocation base, the item most likely to contribute to an unfavorable production-volume variance is:

a new competitor gaining market share

Which of the following is an example of outsourcing?

a petrochemical company assigning a v endor to make software for its supply chain management

Which of the following is an example of insourcing?

a pharmaceutical company'ʹs research team developing a new patent using current resources

A favorable fixed overhead spending variance might indicate that:

a plant expansion did not proceed as originally planned

The master budget is:

a static budget

Which of the following inventory costing methods shown below is most likely to cause undesirable incentives for managers to build up finished goods inventory?

absorption costing

Which of the following inventory costing methods shown below is required by GAAP (Generally Accepted Accounting Principles) for external financial reporting?

absorption costing

When comparing the operating incomes between absorption costing and variable costing, and ending finished inventory exceeds beginning finished inventory, it may be assumed that:

absorption costing operating income exceeds variable costing operating income

At the end of the accounting period Bumsted Corporation reports operating income of $30,000. If Bumstead's inventory levels decrease during the accounting period

absorption costing will report less operating income than variable costing.

The use of theoretical capacity results in an unrealistically low fixed manufacturing cost per unit because it is based on:

an unattainable level of capacity

When making decisions ________.

appropriate weight must be given to both quantitative and qualitative factors

Capacity costs:

are difficult to estimate

Sunk costs ________.

are ignored when evaluating alternatives

Sunk costs:

are irrelevant for deci sion making

Fixed overhead costs:

are unaffected by the degree of operating efficiency in a given budget period

Nonfinancial performance measures:

are usually used in combination with financial measures for control purposes

Management by exception is the practice of concentrating on:

areas not operating as anticipated

Ideal standards:

assume peak operating conditions

The process by which a company's products or services are measured relative to the best possible levels of performance is known as:

benchmarking

The variances that should be investigated by management include:

both favorable and unfavorable variances considered significant in amount for the company

A decision model involves:

both quantitative and qualitative analyses

The flexible budget contains:

budgeted amounts for actual output

Which of the following minimizes the risks of outsourcing?

building close partnerships with the supplier

The sum of all the costs incurred in a particular function, such as marketing, is called the ________.

business function cost

Quantitative factors ________.

can be expressed in monetary terms

Using master-budget capacity to set selling prices:

can result in a downward demand spiral

Normal capacity utilization:

can result in setting selling prices that are not competitive

Given a constant contribution margin per unit and constant fixed costs, the period-to-period change in operating income under variable costing is driven solely by:

changes in the quantity of units actually sold

Switching production to products that absorb the highest amount of fixed manufacturing costs is also called:

cherry picking

Effective planning of variable overhead includes all of the following EXCEPT:

choosing the appropriate level of capacity

The major challenge when planning fixed overhead is:

choosing the appropriate level of capacity

When large differences exist between practical capacity and master-budget capacity utilization, companies may:

classify the difference as planned unused capacity

When benchmarking:

comparisons can highlight areas for better future cost management

Top management faces a persistent challenge to make sure that the performance evaluation model of lower level managers is ________.

consistent with the decision model

A mathematical inequality or equality that must be appeased is known as a(n) ________.

constraint

Repeatedly identifying causes of variances, initiating corrective actions, and evaluating results of actions is an example of

continuous improvement.

The formula for computing the breakeven point in units under variable costing includes all of the following EXCEPT:

contribution margin percentage

Sunk costs are ________.

costs that are unavoidable and cannot be changed no matter what action is taken

Relevant costs in a make-‐‑ or-‐‑buy decision of a part include ________.

currently used manufacturing capacity that has alternative uses

An example of a qualitative factor for the decision-‐‑ making process is ________

customer satisfaction

Andy's Basketball Manufacturing Company reported: Actual fixed overhead $500,000 Fixed manufacturing overhead spending variance $30,000 unfavorable Fixed manufacturing production-volume variance $20,000 unfavorable To isolate these variances at the end of the accounting period, Brandon would:

debit Fixed Manufacturing Overhead Spending Variance for $30,000

The formal process of choosing between alternatives is known as a(n):

decision model

Camera Corner is considering eliminating Model AE2 fr om its camera line because of losses over the past quarter. The past three months of information for Model AE2 are summarized below: Sales (1,000 units) $300,000 Manufacturing costs: Direct materials 150,000 Direct labor ($15 per hour) 60,000 Overhe ad 100,000 Operating loss ($10,000) Overhead costs are 70% variable and the remaining 30% is depreciation of special equipment for model AE2 that has no resale value. If Model AE2 is dropped from the product line, operating income will ________

decrease by $20,000

If Genent'ʹs Engine Company purchases 1,000 TE456 parts from the outside supplier per month, then its monthly ope rating income will ________.

decrease by $3,910

Rambo Company has three products, A, B, and C. The following information is available: Product A Product B Product C Sales $60,000 $90,000 $24,000 Variable costs 36,000 48,000 15,000 Contribution margin 24,000 42,000 9,000 Fixed costs: Avoidable 6,000 15,000 4,000 Unavoidable 7,000 9,000 5,400 Operating income $ 11,000 $18,000 $ (400) Rambo Company is thinking of dropping Product C because it is reporting a loss. Assuming Rambo drops Product C and does NOT replace it, operating income will ________ .

decrease by $5,000

The cost to produce Part A was $20 per unit in 2013 and in 2014 it has increased to $22 per unit. In 2014, Supplier ABC has offered to supply Part A for $18 per unit. For the make -‐‑or-‐‑buy decision ________.

differential costs are $4 per unit

Which of the following cost(s) are inventoried when using variable costing?

direct manufacturing costs

The gross-margin format of the income statement:

distinguishes between manufacturing and nonmanufacturing costs

For fixed manufacturing overhead, there is no:

efficiency variance

These questions refer to flexible-budget variance formulas with the following descriptions for the variables: A = Actual; B = Budgeted; P = Price; Q = Quantity. 23) The best label for the formula (AQ - BQ) BP is the:

efficiency variance

The relative amount of inputs used to achieve a given output level is known as

efficiency.

A nonfinancial measure of performance evaluation is:

energy used per machine-hour

Which of the following is NOT a step in developing budgeted variable overhead rates?

estimating the budgeted denominator level based on expected utilization of available capacity

Which method is NOT a way to discourage producing for inventory?

evaluate performance on a quarterly basis only

Which of the following would be a consideration in a make -‐‑or-‐‑ buy decision?

excess capacity

Relevant costs are ________.

expected future costs

The best way t o avoid misidentification of relevant costs is to focus on ________.

expected future costs that differ among the alternatives

Generally Accepted Accounting Principles require that unitized fixed manufacturing costs be used for:

external reporting

When machine-hours are used as an overhead cost-allocation base and the unexpected purchase of a new machine results in fewer expenditures for machine maintenance, the most likely result would be to report a(n):

favorable variable overhead spending variance

In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are:

fixed costs

The difference between operating incomes under variable costing and absorption costing centers on how to account for:

fixed manufacturing costs

The only difference between variable and absorption costing is the expensing of:

fixed manufacturing costs

Which of the following costs is irrelevant in the decision making of a special order when there is idle production capacity?

fixed manufacturing costs

Advocates of throughput costing maintain that:

fixed manufacturing costs are related to the capacity to produce rather than to the actual production of specific units

There is NOT an output-level variance for variable costing, because:

fixed manufacturing overhead is not allocated to work in process

Which of the following is a relevant cost to be included in a make -‐‑or-‐‑buy decision?

fixed salaries that will not be incurred if the part is outsourced

The variance that is best for measuring operating performance is the:

flexible-budget variance

The fixed overhead cost variance can be further subdivided into the:

flexible-budget variance and the production-volume variance

One of the primary reasons for using cost variances is:

for financial control of operating activities and understanding why variances arise

When deciding whether to discontinue a segment of a business, relevant costs include ________

future administrative costs that can be eliminated

A relevant cost is a cost that is a(n) ________.

future cost

A relevant revenue is revenue that is a(n) ________.

future revenue

A favorable production-volume variance indicates that the company:

has allocated more fixed overhead costs than budgeted

Product mix decisions ________

help determine how to maximize operating profits

Master-budget capacity utilization:

hides the amount of unused capacity

Variable manufacturing overhead costs were ________ for actual output.

higher than expected

Variable-manufacturing overhead costs were ________ for actual output.

higher than expected

With a constraining resource, managers should choose the product with the ________

highest contribution margin per unit of the constraining resource

The contribution-margin format of the income statement:

highlights the lump sum of fixed manufacturing costs

A favorable cost variance of significant magnitude:

if investigated, may lead to improved production methods

Factors used to decide whether to outsource a part include ________.

if the supplier is reliable

The sales-volume variance is due to:

inaccurate forecasting of units sold

Qualitative factors ________.

include customer satisfaction

Absorption costing:

includes fixed manufacturing overhead as an inventoriable cost

If Pizza For Everyone replaces the existing delivery van with the new one, over the next 10 years operating income will ________.

increase by $75,000

Schwimmer Lighting manufactures small flashlights and is considering raising the price by 50 cents a unit for the coming year. With a 50-cent price increase, demand is expected to fall by 6,000 units. CurrentlyProjectedDemand 40,000 units 34,000 units Selling price $4.50 $5.00 Incremental cost per unit $3.00 $3.00 6) If the price increase is implemented, operating profit is projected to:

increase by $8,000

Practical capacity may:

increase over time due to improvements in plant layout

Discontinuing unprofitable products will ________.

increase profitability if the resources no longer required by the discontinued product can be eliminated

Capacity constraints include ________

increased need of display space for a retailer

The effect of spreading fixed manufacturing costs over a shrinking master-budget capacity utilization amount results in:

increased unit costs

Under absorption costing, if a manager's bonus is tied to operating income, then increasing inventory levels compared to last year would result in:

increasing the manager's bonus

For make-‐‑or-‐‑buy decisions, relevant costs include ________

incremental costs plus opportunity costs

One-‐‑time -‐‑only special orders should only be accepted if ________.

incremental revenues exceed incremental costs

When there is an excess capacity, it makes sense to accept a one -‐‑time -‐‑only special order for less than the current selling price if ________.

incremental revenues exceed incremental costs

When actual input data from past periods is used to develop a budget:

information is available at a low cost

Smiley Face Company manufactures signs from direct materials to the finished product. This is considered ________.

insourcing

Choosing the appropriate level of capacity:

is a key strategic decision

A flexible budget:

is developed at the end of the period

The gross-margin format of the income statement:

is used with absorption costing

The contribution-margin format of the income statement:

is used with variable costing

Which of following is a firm'ʹs risk of outsourcing the production of a part?

leakage of intellectual property

The management accountant for Giada'ʹs Book Store has prepared the following income sta tement for the most current year: Cookbook Travel Book Classics Total Sales $60,000 $100,000 $40,000 $200,000 Cost of goods sold 36,000 65,000 20,000 121,000 Contribution margin 24,000 35,000 20,000 79,000 Order and delivery processing 18,000 21,000 8 ,000 47,000 Rent (per sq. foot used) 2,000 1,000 3,000 6,000 Allocated corporate costs 7,000 7,000 7,000 21,000 Corporate profit $ (3,000) $ 6,000 $ 2,000 $ 5,000 9) If the cookbook product line had been discontinued prior to this year, the company wou ld have reported ________.

less corporate profits

A favorable efficiency variance for direct manufacturing labor indicates that:

less direct manufacturing labor-hours were used during production than planned for actual output

Which of the following methods is used to determine the most profitable production schedule and the most profitable product mix?

linear programming

The actual information pertains to the month of September. As part of the budgeting process, Kriger Fencing Company developed the following static budget for September. Kriger is in the process of preparing the flexible budget and understanding the results. Actual Flexible Static Results Budget Budget Sales volume (in units) 10,000 12,500 Sales revenues $500,000 $ $625,000 Variable costs 256,000 $ ________ 300,000 Contribution margin 244,000 $ 325,000 Fixed costs 229,000 $ ________ 225,000 Operating profit $ 15,000 $ $ 100,000 1) The primary reason for low operating profits was:

lower sales volume than planned

Variable-manufacturing overhead costs were ________ for actual output.

lower than expected

The higher the denominator level, the:

lower the amount of fixed manufacturing costs allocated to each unit produced

Variable overhead costs include:

machine maintenance

An unfavorable efficiency variance for direct manufacturing labor might indicate that:

machines were not properly maintained

Piels Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows: Direct materials $ 90,000 Direct labor 130,000 Variable factory overhead 60,000 Fixed factory overhead 140,000 Total costs $420,000 Of the fixed factory overhead costs, $60,000 is avoidable. 46) Co nners Company has offered to sell 10,000 units of the same part to Piels Corporation for $36 per unit. Assuming there is no other use for the facilities, Schmidt should ________.

make the part, as this would save $2 per unit

Which of the following costs is NOT considered to calculate the minimum acceptable price of a one-‐‑time -‐‑only special order?

marketing costs

The marketing manager's performance evaluation is most fair when based on a denominator level using:

master-budget capacity utilization

A single variance:

may be the result of many different problems

An unfavorable variance:

may suggest investigation is needed

An unfavorable production-volume variance:

measures the amount of extra fixed costs planned for but not used

Which of the three product models should be produced first if management incorporates a short -‐‑run profit maximizing strategy?

medium appliance

Variable and absorption costing may be combined with all costing systems EXCEPT:

mixed costing

If the unit level of inventory increases during an accounting period, then:

more operating income will be reported under absorption costing than variable costing

Zephyr Energies, Inc. is considering eliminating one of its product lines. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. What financial effe cts occur if the product line is discontinued?

net income will decrease by the amount of the contribution margin of the product line being discontinued

It is most difficult to estimate ________ because of the need to predict demand for the next few years.

normal capacity utilization

Under variable costing, if a manager's bonus is tied to operating income, then increasing inventory levels compared to last year would result in:

not affecting the manager's bonus

Unit cost data can most mislead decisions by ________.

not computing unit costs at the same output level

The amount reported for fixed overhead on the static budget is also reported:

on the flexible budget

All of the following are examples of drawbacks of using absorption costing EXCEPT:

operating income solely reflects income from the sale of units and excludes the effects of manipulating production schedules

If Talium Services Inc. does not use one of its limited resources in the best possible way, the lost cont ribution to income could be called a(n) ________

opportunity cost

Schmidt Sewing Company incorporates the services of Deb'ʹs Sewing. Schmidt purchases pre-‐‑ cut dresses from Deb'ʹs. This is primarily known as ________.

outsourcing

When standards are used to develop a budget:

past inefficiencies are excluded

If management takes a multiple-‐‑ year view in the decision model and judges success according to the current year'ʹs results, a problem will occur in the ________.

performance evaluation model

Variable costing regards fixed manufacturing overhead as a(n):

period cost

The term budget indicates:

planned amounts for a future accounting period

Effective planning of fixed overhead costs includes all of the following EXCEPT:

planning day-to-day operational decisions

Which of the following would be considered in a make -‐‑or-‐‑buy decision?

potential rental income from space occupied by the production area

The Internal Revenue Service requires the use of ________ for calculating fixed manufacturing costs per unit.

practical capacity

From the perspective of long-run product costing it is best to use:

practical capacity for pricing decisions

The best label for the formula (AP - BP) AQ is the:

price variance

The best label for the formula [(AP)(AQ) - (BP)(AQ)] is the:

price variance

The flexible-budget variance for direct cost inputs can be further subdivided into a:

price variance and an efficiency variance

Determining which prod ucts should be produced when the plant is operating at full capacity is referred to as a(n) ________

product-‐‑mix decision

An favorable production-volume variance occurs when:

production exceeds the denominator level

If a sales-volume variance was caused by poor-quality products, then the ________ would be in the best position to explain the variance.

production manager

For variable manufacturing overhead, there is no:

production-volume variance

The difference between budgeted fixed manufacturing overhead and the fixed manufacturing overhead allocated to actual output units achieved is called the fixed overhead:

production-volume variance

Fixed overhead costs include:

property taxes paid on plant facilities

When benchmarking, management accountants are MOST valuable when they:

provide insight into why costs or revenues differ across companies

For make-‐‑ or-‐‑buy decisions, a supplier'ʹs ability to maintain secrecy of intellectual property is considered a(n) ________.

qualitative factor

Employee morale at Dos Santos, Inc., is very high. This type of information is an example of ________

qualitative factors

Roberto owns a small body shop. His major costs include labor, parts, and rent. In the decision -‐‑making process, these costs are considered to be ________.

quantitative factors

Other than price, what other items should Contrafic'ʹs Kitchens consider before accepting this one-‐‑ time -‐‑only special order?

reaction of existing customers to the lower price offered to Mr. Louis Cifer

Practical capacity is the denominator-level concept that:

reduces theoretical capacity for unavoidable operating interruptions

In evaluating different alternatives, it is useful to concentrate on ________.

relevant costs

Which of the following costs always differ among future alternatives?

relevant costs

Budgeted fixed manufacturing costs of a product using practical capacity:

represents the cost per unit of supplying capacity

Throughput contribution equals:

revenues minus all direct material cost of goods sold

When machine-hours are used as a cost-allocation base, the item most likely to contribute to a favorable production-volume variance is:

strengthened demand for the product

One possible means of determining the difference between operating incomes for absorption costing and variable costing is by:

subtracting fixed manufacturing overhead in beginning inventory from fixed manufacturing overhead in ending inventory

Throughput costing is also called:

super-variable costing

Excess capacity is a sign:

that capacity may need to be re-evaluated

An unfavorable price variance for direct materials might indicate:

that the purchasing manager purchased in smaller quantities due to a change to just-in-time inventory methods

Pizza For Everyone is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van follow: Existing van New van Original cost $50,000 $90,000 Annual operating cost $ 17,500 $ 10,000 Accumulated depreciation $ 30,000 — Current salvage value of the existing van $ 22,500 — Remaining life 10 years 10 years Salvage value in 10 years $ 0 $ 0 Annual depreciation $ 2,000 $ 9,000 8) Sunk costs include ________.

the accumulated depreciation of the existing van

An unfavorable variance indicates that:

the actual amount decreased operating income relative to the budgeted amount

A $5,000 unfavorable flexible-budget variance indicates that:

the actual variable manufacturing overhead exceeded the flexible-budget amount by $5,000

Relevant costs for this decision include ________

the annual operating cost

The breakeven point using absorption costing depends on all of the following factors, EXCEPT:

the budgeted level of production

The most likely explanation of the above direct manufacturing labor variances is that:

the company may have assigned more experienced employees this month than originally planned

Opportunity costs is defined as ________

the contribution to operating income that is forgone by not using a limited resource in its next-‐‑best alternative use

Customers expect to pay a price that includes:

the cost of actual capacity used

Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily add value for:

the customer using the products or services

A variance is:

the difference between an actual result and a budgeted amount

Typically, managers have the LEAST control over:

the direct material price variance

The opportunity cost of holding significant inventory includes ________.

the interest forgone on an alternative investment

Managers tend to favor the alternative that makes their performance look best. Therefore, they tend to focus on ________.

the measures used in the performance evaluation model

Indium Services, Inc., is considering replacing a mac hine. The following data are available: Replacement Old Machine Machine Original cost $630,000 $490,000 Useful life in years 10 5 Current age in years 5 0 Book value $350,000 — Disposal value now $112,000 — Disposal value in 5 years 0 0 Annual ca sh operating costs $98,000 $56,000 11) Which of the data provided in the table is a sunk cost?

the original cost of the old machine

An unfavorable fixed overhead spending variance indicates that:

the price of fixed overhead items cost more than budgeted

An unfavorable variable overhead spending variance indicates that:

the price of variable overhead items was more than budgeted

When machine-hours are used as a cost-allocation base, the item most likely to contribute to a favorable variable overhead efficiency variance is:

the production scheduler's impressive scheduling of machines

The variable overhead efficiency variance is computed ________ and interpreted ________ the direct-cost efficiency variance.

the same as; differently than

A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost?

the setup cost of the new equipment

Business function costs are ________.

the sum of all variable and fixed costs in a particular business function of the value chain

Based on the theory of constraints, investments equal ________.

the sum of material cost s in direct materials, work -‐‑in-‐‑process, and finished goods inventories; R&D costs; and capital costs of equipment and buildings

An unfavorable variable overhead efficiency variance indicates that:

the variable overhead cost-allocation base was not used efficiently

The primary reason for high actual operating profits was:

the variable-cost variance

Operating income reported on the end-of-period financial statements is changed when ________ is (are) used to handle the production-volume variance at the end of the accounting period.

the write-off variances to cost of goods sold approach

The budgeted fixed manufacturing cost rate is the lowest for:

theoretical capacity

If 1,000 units are produced and only 700 units are sold, ________ results in the greatest amount of expense reported on the income statement.

throughput costing

If 800 units are produced and 1,200 units are sold, ________ results in the greatest amount of operating income.

throughput costing

Which of the following inventory costing methods results in the LEAST amount of costs being inventoried?

throughput costing

Which of the following inventory costing methods shown below is LEAST likely to cause undesirable incentives for managers to build up finished goods inventory?

throughput costing

Many companies have switched from absorption costing to variable costing for internal reporting:

to reduce the undesirable incentive to build up inventories

Variance analysis should be used:

to understand why variances arise

The best label for the formula [(AP)(AQ) - (BP)(BQ)] is the:

total flexible-budget variance

If a company has excess capacity, the most it would pay for buying a product that it currently makes would be the ________.

total variable cost of producing the product

Overhead costs have been increasing due to all of the following EXCEPT:

tracing more costs as direct costs with the help of technology

Variable costing:

treats direct manufacturing costs as a product cost

Fixed overhead is:

underallocated by $44,000

A favorable price variance for direct manufacturing labor might indicate that:

underskilled employees are being hired

If manufacturing machines are breaking down more than expected, this will contribute to a(n):

unfavorable direct manufacturing labor efficiency variance

When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the most likely result would be to report a(n):

unfavorable fixed overhead flexible-budget variance

When machine-hours are used as an overhead cost-allocation base, a rush order resulting in unplanned overtime that used less-skilled workers on the machines would most likely contribute to reporting a(n):

unfavorable variable overhead efficiency variance

The following items are the same for the flexible budget and the master budget EXCEPT for:

units sold

An unfavorable production-volume variance of $20,000 indicates that the company has:

unused fixed manufacturing overhead capacity

From the perspective of control, the direct materials efficiency variance should be isolated at the time of:

use

When machine-hours are used as a cost-allocation base, the item most likely to contribute to an unfavorable variable overhead efficiency variance is:

using more machine hours than budgeted

In general, if inventory increases during an accounting period,

variable costing will report less operating income than absorption costing

Which of the following costs is relevant in a decision -‐‑making process?

variable costs

Which of the following is an example of sunk costs?

wages to security staffs

Variances should be investigated:

when there is a small variance for critical items such as product defects

Theoretical capacity:

when used for product costing results in the lowest cost estimate of the four capacity options

For decision making, a listing of the relevant costs:

will help the decision maker concentrate on the pertinent data