302 final bank questions

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The order to follow when preparing the operating budget is ________.

revenues budget, production budget,.... direct manufacturing labor costs budget , and cost of goods sold

The breakeven point is the activity level where ________.

revenues equal the sum...of variable and fixed costs

In general, which of the following budgets is prepared first?

sales budget

The contribution margin per unit equals ____________________ .

selling price - variable costs per unit

Which of the following is an example of scrap?

short lengths from woodworking operations that must be discarded

Which of the following is not true about one-time-only special orders?

special orders... would be accepted if they result in an increase in the contribution margin regardless of capacity and long-term implications

Which of the following groups would be least likely to receive detailed management accounting reports?

stockholders

Which of the following is not a concern for management accountants in formulating a strategy?

strategizing compliance with GAAP (Generally Accepted Accounting Principles)

An unfavorable variance indicates that ________.

the actual units sold are less than the budgeted units

Cost allocation is ________.

the assignment...of indirect costs to the chosen cost object

Operating decisions primarily deal with ________.

the best use of scarce resources

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

The primary user of management accounting information is a(n) ________.

the controller

Direct materials inventory costs would normally include ________.

the cost of materials in stock are part of the cost object (product) and can be traced to that cost object in an economically feasible way

Zephram Corporation has a plant capacity of 200,000 units per month. Unit costs at capacity are: Direct materials $6.00 Direct labor 5.00 Variable overhead 4.00 Fixed overhead 2.00 Marketing—fixed 6.00 Marketing/distribution—variable 4.60 Current monthly sales are 190,000 units at $30.00 each. Q, Inc., has contacted Zephram Corporation about purchasing 2,500 units at $24.00 each. Current sales would not be affected by the one-time-only special order. What is Zephram's change in operating profits if the one-time-only special order is accepted?

$11,000 increase

________ are all manufacturing costs that are related to the cost object but cannot be traced to that cost object in an economically feasible way.

Indirect manufacturing costs

Which of the following statements is true of normal spoilage?

It arises....even when the process is carried out in an efficient manner.

Which of the following is true of cost accounting?

It is part of both management and financial accounting systems.

Which of the following statements is true of an abnormal spoilage?

It is usually regarded as avoidable and controllable.

________ is used to record and accumulate all the costs assigned to a specific job.

Job-cost record

One of the first steps to take when using CVP analysis to help make decisions is ________.

identifying the variable and fixed costs

Period costs ________.

include the cost of selling, delivering, and after-sales support for customers

Flash City Inc. manufactures small flash drives and is considering raising the price by 75 cents a unit for the coming year. With a 75-cent price increase, demand is expected to fall by 7,000 units.

increase by $35,100

Service companies, in particular, find great value from ABC because a vast majority of their cost structure is composed of ________ costs.

indirect

Activity based costing system differs from traditional costing systems in the treatment of ________.

indirect costs

For a company with diverse products, undercosting overhead of a product will lead to product-cross -subsidization which means that:

indirect costs of another product are misallocated

Manufacturing overhead costs in an automobile manufacturing plant most likely include ________.

indirect material costs such as lubricants

A controllable cost is any cost that can be ________ by a responsibility center manager for a period of time.

influenced

The sales forecast should be primarily based on ________.

input from sales managers and sales representatives

Costs that are initially recorded as assets and expensed when goods sold are called ________.

inventoriable costs

A regional manager of a restaurant chain in charge of finding additional locations for expansion is most likely responsible for a(n) ________.

investment center

A budget ________.

is an aid for coordinating what needs to be done to execute a plan

In a normal costing system, the Manufacturing Overhead Control account ________.

is debited with actual overhead costs

It only makes sense to implement an ABC system when ________.

its benefits ...exceed its implementation costs

The basic source document for direct manufacturing labor is the ________.

labor-time record

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 departments is most likely to be a cost center?

maintenance department of a luxury resort

Which of the following best describes scrap?

residual material ....that results from manufacturing a product

Actual costing is a costing system that traces direct costs to a cost object by ________.

using the ACTUAL direct cost rates times the ACTUAL quantities of the direct−cost inputs

The contribution income statement highlights ________.

variable and fixed costs

Product-cost cross-subsidization means that:

when a company undercosts one of its products, it will overcost at least one... of its other products

When a greater proportion of costs are fixed costs, then ________.

when demand is low the risk of loss is high

Ethical challenges for management accountants include ________.

whether to accept gifts from suppliers..., knowing it is an effort to indirectly influence decisions

A distinct feature of the FIFO process-costing method is that the ________.

work done on beginning inventory before the current period is KEPT SEPERATE from the work done during the current period in the calculation of equivalent units

Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container. Budgeted quantity Budgeted price Direct materials 0.70 pounds $70 per pound Direct labor 0.10 hours $35 per hour During June, Heavy Products produced and sold 25,000 containers using 23,000 pounds of direct materials at an average cost per pound of $75 and 17,500 direct manufacturing labor-hours at an average wage of $35.75 per hour. The direct material price variance during June is ________.

$115,000 unfavorable

Better Products Company manufactures insulation 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 October 2018: Direct materials $370,000 Direct labor (3,300 hours @ $17/hour) 56,100 Indirect labor 22,000 Plant facility rent 53,000 Depreciation on plant machinery and equipment 41,000 Sales commissions 17,000 Administrative expenses 29,000 The actual amount of manufacturing overhead costs incurred in October 2018 totals ________.

$116,000

Mid City Products Inc. (MCP), developed standard costs for direct material and direct labor. In 2017, MCP estimated the following standard costs for one of their most popular products. Budgeted quantity Budgeted price Direct materials 7 pounds $7.30 per pound Direct labor 0.50 hours $10.00 per hour During September, MCP produced and sold 2,000 units using 14,400 pounds of direct materials at an average cost per pound of $7.00 and 950 direct labor hours at an average wage of $10.40 per hour. The direct labor flexible-budget variance during September is ________.

$120.00 favorable

Buildz Manufacturing currently produces 2,000 tables per month. The following per unit data for 2,000 tables apply for sales to regular customers: Direct materials $75 Direct manufacturing labor 20 Variable manufacturing overhead 20 Fixed manufacturing overhead 40 Total manufacturing costs $155 What is the per unit cost when producing 4,000 tables?

$135.00

North Street Corporation manufactures two models of motorized go-carts, a standard and a deluxe model. The following activity and cost information has been compiled: Number of Number of Number of Product Setups Components Direct Labor Hours Standard 17 6 710 Deluxe 27 18 420 Overhead costs $15,400 $22,560 Assume a traditional costing system applies the $37,960 of overhead costs based on direct labor hours. What is the total amount of overhead cost assigned to the deluxe model? (Do not round interim calculations. Round the final answer to the nearest whole dollar.)

$14,109

$142.50 unfavorable

Planet Design Services, Inc., is considering replacing a machine. The following data are available: Replacement Old Machine Machine Original cost $650,000 $510,000 Useful life in years 10 5 Current age in years 5 0 Book value $400,000 — Disposal value now $142,000 — Disposal value in 5 years 0 0 Annual cash operating costs $100,000 $66,000 The difference between keeping the old machine and replacing the old machine is ________.

$198,000 in favor of keeping the old machine

Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container. Budgeted quantity Budgeted price Direct materials 0.90 pounds $60 per pound Direct labor 0.10 hours $30 per hour During June, Heavy Products produced and sold 19,000 containers using 1,200 pounds of direct materials at an average cost per pound of $63 and 17,100 direct manufacturing labor-hours at an average wage of $31.25 per hour. The direct manufacturing labor price variance during June is ________.

$21,375 unfavorable

Puritan Apparels is a clothing retailer. Unit costs associated with one of its products, Product AHF 130, are as follows: Direct materials $110 Direct manufacturing labor 90 Variable manufacturing overhead 45 Fixed manufacturing overhead 33 Sales commissions (2% of sales) 10 Administrative salaries 28 Total $316 What are the direct variable manufacturing costs per unit associated with Product AHF 130?

$245

Tally Corp. sells softwares during the recruiting seasons. During the current year, 14,000 software packages were sold resulting in $460,000 of sales revenue, $110,000 of variable costs, and $50,000 of fixed costs. Contribution margin per software is ________.

$25

Jalbert Incorporated planned to use materials of $11 per unit but actually used materials of $13 per unit, and planned to make 1,590 units but actually made 1,780 units. The flexible-budget variance for materials is ________.

$3,560 unfavorable

Answer the following questions using the information below: These questions refer to flexible-budget variance formulas with the following descriptions for the variables: A = Actual; B = Budgeted; P = Price; Q = Quantity. The flexible-budget variance for materials is $2,000 (U). The sales-volume variance is $18,000 (U). The price variance for material is $38,000 (F). The efficiency variance for direct manufacturing labor is $12,000 (F). Calculate the efficiency variance for materials.

$40,000 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

Dalrymple Company produces a special spray nozzle. The budgeted indirect total cost of inserting the spray nozzle is $68,750. The budgeted number of nozzles to be inserted is 11,000. What is the budgeted indirect cost allocation rate for this activity?

$6.25

Dartmouth Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled:

$61,200

$680 favorable

$840 favorable

W.T. Ginsburg Engine Company manufactures part ACT30107 used in several of its engine models. Monthly production costs for 1,090 units are as follows: Direct materials $46,000 Direct labor 10,500 Variable overhead costs 32,500 Fixed overhead costs 22,000 Total costs $111,000 It is estimated that 6% of the fixed overhead costs assigned to ACT30107 will no longer be incurred if the company purchases ACT30107 from the outside supplier. W.T Ginsburg Engine Company has the option of purchasing the part from an outside supplier at $94.75 per unit. If the company accepts the offer from the outside supplier, the monthly avoidable costs (costs that will no longer be incurred) total ________.

$90,320

First Class, Inc., expects to sell 29,000 pool cues for $13 each. Direct materials costs are $3, direct manufacturing labor is $5, and manufacturing overhead is $0.83 per pool cue. The following inventory levels apply to 2019: Beginning inventory Ending inventory Direct materials 24,000 units 24,000 units Work-in-process inventory 0 units 0 units Finished goods inventory 1,200 units 2,800 units What are the 2019 budgeted costs for direct materials, direct manufacturing labor, and manufacturing overhead, respectively?

$91,800; $153,000; $25,398

Genent Industries, Inc. (GII), developed standard costs for direct material and direct labor. In 2017, GII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container. Budgeted quantity Budgeted price Direct materials 0.40 pounds $50 per pound Direct labor 0.50 hours $11 per hour During July, GII produced and sold 4,000 containers using 1,750 pounds of direct materials at an average cost per pound of $48 and 2,090 direct manufacturing labor hours at an average wage of $11.30 per hour. The direct manufacturing labor efficiency variance during July is ________.

$990.00 unfavorable

Which of the following is the correct formula for the materials price variance?

(Actual price of input - Budgeted price of input) x Actual quantity of input

100

High Traffic Products Corporation has two departments, Small and Large. Central costs could be allocated to the two departments in various ways. Small Department Large Department Square footage 6,850 17,200 Number of employees 1,180 460 Sales $300,000 $1,790,000 If total rent expense of $144,300 is allocated on the basis of square footage, the amount allocated to the Large Department would be ________. (Do not round interim calculations. Round the final answer to the nearest whole dollar.)

103200

Mary's Baskets Company expects to manufacture and sell 30,000 baskets in 2019 for $5 each.

150000

Sky High sells helicopters. During the current year, 130 helicopters were sold resulting in $840,000 of sales revenue, $260,000 of variable costs, and $350,000 of fixed costs. The number of helicopters that must be sold to achieve $320,000 of operating income is ________.

151 units

Smith Office Equipment Company's budgeted manufacturing overhead is $5,400,000. Overhead is allocated on the basis of direct labor hours. The budgeted direct labor hours for the period are 30,000. What is the manufacturing overhead rate?

180

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 June 2017: Work in process, beginning inventory 25,400 units Transferred-in costs (100% complete) Direct materials (0% complete) Conversion costs (85% complete) Transferred in during current period 165,100 units Completed and transferred out 185,200 units Work in process, ending inventory 5700 units Transferred-in costs (100% complete) Direct materials (0% complete) Conversion costs (65% complete) How many units must be accounted for during the period?

190,500 units

A company budgets 10,000 units of sales based on a projected selling price of $13.00. The actual units sold were 15,000 at a price of $10. What is the flexible budget for sales?

195,000

Assembly department of Zahra Technologies had 200 units as work in process at the beginning of the month. These units were 45% complete. It has 300 units which are 35% complete at the end of the month. During the month, it completed and transferred 500 units. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Zahra uses weighted-average process-costing method. Calculate the total equivalent units in ending inventory for assignment of conversion costs?

200

Bell Company sells several products. Information of average revenue and costs is as follows:

22.95

Dessa Cabinetry, Inc., manufactures standard sized modular cabinet units for kitchens and other applications within the home. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through the rough cut department and the finish department. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Data for Finishing Department for March 2017 are: Work in process, beginning inventory, 20% converted 1000 units Units started during February 1800 units Work in process, ending inventory 500 units Costs for Finishing Department for March 2017 are: Work in process, beginning inventory: Direct materials $200,000 Conversion costs $204,000 Direct materials costs added during February $428,000 Conversion costs added during February $141,000 How many units were completed and transferred out of the Finishing Department during March?

2300 units

Extreme Manufacturing Company provides the following ABC costing information: Activities Total Costs Activity-cost drivers Account inquiry $320,000 16,000 hours Account billing $220,000 4,000,000 lines Account verification accounts $182,000 80,000 accounts Correspondence letters $25,000 4,000 letters Total costs $747,000 The above activities are used by Departments A and B as follows: Department A Department B Account inquiry hours 2,200 hours 3,700 hours Account billing lines 600,000 lines 450,000 lines Account verification accounts 5,000 accounts 3,000 accounts Correspondence letters 1,000 letters 1,400 letters How much of the account billing cost will be assigned to Department B?

24750

Bauer Manufacturing uses departmental cost driver rates to allocate manufacturing overhead costs to products.

2485

27360

Dantley's Furniture manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $190per table

27360

SaleCo sells 11,000 units resulting in $110,000 of sales revenue, $50,000 of variable costs, and $45,000of fixed costs.

357,500

Sparkle Jewelry sells 600 units resulting in$75,000 of sales revenue, $32,000 of variable costs, and $26,000 of fixed costs.

363 units

How many units would have to be sold to yield a target operating income of $26,000, assuming variable costs are $27 per unit, total fixed costs are $2,000, and the unit selling price is $32?

5,600 units

Quality Stores, Inc., sells several products. Information of average revenue and costs is as follows: Selling price per unit $20 Variable costs per unit: Direct material $4 Direct manufacturing labor $1.80 Manufacturing overhead $0.4 Selling costs $3 Annual fixed costs $96,000 What is the contribution margin percentage? (Round your answer to the nearest whole percent.)

54%

Globus Autos sells a single product. 8,000 units were sold resulting in $83,000 of sales revenue,$21,000 of variable costs, and $10,000 of fixed costs.

6,911 units

Comfort chair company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 73,900 chairs. During the month, the firm completed 78,400 chairs, and transferred them to the Finishing Department. The firm ended the month with 11,200 chairs in ending inventory. There were 15,700 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Comfort. Beginning work in process was 25% complete as to conversion costs, while ending work in process was 70% complete as to conversion costs.

62,700

SaleCo sells 8,400 units resulting in $120,000 of sales revenue, $35,000 of variable costs, and $45,000 of fixed costs. The contribution margin percentage is ________.

70.83%

Charlie Chairs Inc., manufactures plastic moldings for car seats. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through Department A and Department B. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Data for Department A for February 2017 are: Work in process, beginning inventory, 30% converted 200 units Units started during February 800 units Work in process, ending inventory 240 units Costs for Department A for February 2017 are: Work in process, beginning inventory: Direct materials $150,000 Conversion costs $210,000 Direct materials costs added during February $603,000 Conversion costs added during February $429,000 How many units were completed and transferred out of Department A during February?

760 units

Comfort chair company manufacturers a standard recliner. During February, the firm's Assembly Department started production of 73,100 chairs. During the month, the firm completed 78,000 chairs, and transferred them to the Finishing Department. The firm ended the month with 10,800 chairs in ending inventory. There were 15,700 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by Comfort. Beginning work in process was 30% complete as to conversion costs, while ending work in process was 75% complete as to conversion costs. Beginning inventory: Direct materials $24,800 Conversion costs $36,000 Manufacturing costs added during the accounting period: Direct materials $168,100 Conversion costs $278,800 What were the equivalent units for conversion costs during February?

81,390

Jane Industries manufactures plastic toys. During October, Jane's Fabrication Department started work on 10,300 models. During the month, the company completed 11,900 models, and transferred them to the Distribution Department. The company ended the month with 1100 models in ending inventory. There were 2700 models in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is being followed. Beginning work in process was 25% complete as to conversion costs, while ending work in process was 50% complete as to conversion costs. Beginning inventory: Direct materials costs $20,200 Conversion costs $11,400 Manufacturing costs added during the accounting period: Direct materials costs $70,500 Conversion costs $241,000 How many of the units that were started and completed during October?

9200

Management by exception is a practice whereby managers focus more closely on ________.

areas.. that are not operating as anticipated

The budgeted indirect-cost rate is calculated ________.

at the beginning of the year

Which of the following reasons explain why ABC concepts may be of great value to service companies?

A significant.... portion of the cost structure of a service firm is composed of indirect costs

Which of the following statements is true of ABC systems?

ABC system employs multiple activity-cost drivers.

Which of the following statements is true of activity-based costing?

Activity based costing is more suited ...to companies with high product diversity than companies with single product line.

A major advantage of using the FIFO process-costing method is that:

FIFO provides... managers with information about changes in the costs per unit from one period to the next

Which of the following statements is true??

Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs.

John's 8-year-old Chevrolet Trail Blazer requires repairs estimated at $7,000

Buy the Grand Cherokee; $880

John's 8-year-old Chevrolet Trail Blazer requires repairs estimated at $7,000 to make it road worthy again. His wife, Sherry, suggested that he should buy a 5-year-old used Jeep Grand Cherokee instead for $7,000 cash. Sherry estimated the following costs for the two cars:

Buy the Grand Cherokee; $880

A manufacturer utilizes three separate indirect cost pools. Which of the following is true?

Each indirect cost pool utilizes a separate... cost-allocation rate

Place the five steps in the decision-making process in the correct order:

C A E B D

Put the following ABC implementation steps in order ________.

CDAB

Arrangement of long-term financing is an integral part of the ________ function in an organization.

CFO

When the amount of scrap is immaterial, which of the following is the easiest accounting entry when recording scrap sold for cash?

Cash Scrap Revenue

Which of the following statements best describes conversion costs?

Conversion costs are all manufacturing costs other than direct materials costs.

________ is the process of assigning indirect costs to products.

Cost allocation

________ is an after-sale support provided to customers.

Customer service

Sunk costs ________.

are irrelevant... for decision making

In which order are the following developed? First to last:

DABC

When a Bakery transfers goods from the Mixing Department to the Baking Department, the accounting entry would be ________.

Debt: Work in Process — Baking Department Credit: Work in Process — Mixing Department

Which of the following companies is most likely to use process costing?

Dental Bright Inc., a company manufacturing and selling toothpaste on a large scale

Which of the following statements about normal costing is true?

Direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate

Processing orders and shipping products or providing services to customers is known as ________.

Distribution

Financing decisions primarily deal with ________.

how to obtain funds to acquire resources

Johnson Superior Products Inc. produces hospital equipment and the setup requirements vary from product to product. Johnson produces its products based on customer orders and uses ABC costing. In one of its indirect cost pools, setup costs and distribution costs are pooled together. Costs in this pool are allocated using number of customer orders for the easiness of costing operations. Based on the information provided, which of the following arguments is valid?

Johnson has failed to use the correct cost driver as the cost-allocation base for setup costs.

Process costing would most likely be used to assign costs to products produced by which of these companies?

Jones Flour Mill

Which item is an indication of competence under the Standards of Ethical Conduct?

Maintain an appropriate level of professional expertise by continually developing knowledge and skills.

Which of the following is true of variance?

Managers should not simply interpret a favorable variance as good but should understand why the variance occurred.

If scrap is reused as direct material rather than sold as scrap, which of the following would be the proper account?

Materials Control ....is debited at its estimated net realizable value and then credited when the scrap is reused.

McMurphy Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 12,000 units of this part are as follows: Direct materials $86,000 Direct labor 126,000 Variable factory overhead 58,000 Fixed factory overhead 138,000 Total costs $408,000 Of the fixed factory overhead costs, $55,000 is avoidable. Conners Company has offered to sell 12,000 units of the same part to McMurphy Corporation for $41 per unit. Assuming there is no other use for the facilities, Schmidt should ________.

NOT make the part, as this would save $16 per unit.......................buy the part, as this would save the company $192,000

A leather shoe manufacturer makes "duck" boots that consist of leather and rubber.

NOT rework

The cost system of Charlton Frabricators indicates that a product cost $30 to make in house. Of that $30 cost, $7 consists of plant costs that have already been paid for. A supplier proposes to make the same product for $26 but Charlton's plant will have idle time and because of budgetary constraints, will not be retooled to take advantage of that idle time. Should the product be outsourced to the supplier?

No because the relevant cost for making the product is only $23 .

Which of the following differentiates job costing from process costing?

Process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches.

A company has three products possible products that it can produce in a machine intensive production process. Capacity is constrained by the number of hours the machines can run during a period and the products are so popular that all units produced will be sold. Here is additional information: Product A Product B Product C Contribution per unit $20 $30 $40 Machine hours per unit 2.5 3.25 4.5 Which of the following would be an accurate conclusion based on these facts?

Product B should be emphasized if the goal is to maximize contribution margin.

________ are the costs of activities undertaken to support individual products or services regardless of the number of units or batches in which the units are produced.

Product-sustaining costs

Which of the following is a component of operating budgets?

Production Budget

Which item is an indication of integrity under the Standards of Ethical Conduct?

Refrain from engaging in any conduct that would prejudice carrying out duties ethically.

A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the ________.

Relevant range

________ is the usual starting point for budgeting.

The revenues budget

Which of the following is true of cost-volume-profit analysis?

The theory assumes that units ....manufactured equal units sold.

Which of the following statements is true?

There is a cause-and-effect relationship between the cost driver and the amount of cost.

Which of the following is true of budgets when they are administered thoughtfully?

They promote... coordination within the subunits of a company.

Which of the following is an assumption of CVP analysis?

Total costs can be divided into a fixed... component and a component that is variable with respect to the level of output.

Atlas Manufacturing produces a unique valve, and has the capacity to produce 50,000 valves annually. Currently Atlas produces 40,000 valves and is thinking about increasing production to 45,000 valves next year. What is the most likely behavior of total manufacturing costs and unit manufacturing costs given this change?

Total manufacturing costs will increase and unit manufacturing costs will decrease.

When $10,0000 direct materials are requisitioned, which of the following would be the correct journal entry?

Work-in-Process Control $10,000 Materials Control $10,000

Flash City Inc. manufactures small flash drives and is considering raising the price by 75 cents a unit for the coming year.

Yes, because operating ...profits increase.

Which of the following is the most frequently used budget periods used in business?

a basic budget period of 1 year often subdivided into quarters and months

Costs of normal spoilage are usually accounted for as ________.

a component of the costs of good units manufactured

Which of the following can be a reason for a favorable price variance for direct materials?

a decrease ..in the price of materials due to an oversupply of materials

The loss from abnormal spoilage account would appear ________.

a separate...line item on an income statement

Sensitivity analysis is ________.

a way of determining what will ...happen if assumptions change

Companies that attempt to achieve zero defects in the manufacturing process treat spoilage as ________.

abnormal spoilage

Spoilage that is not inherent in a particular production process and would not arise under efficient operating conditions is referred to as ________.

abnormal spoilage

Production is the ________.

acquisition, coordination, and assembly of resources to produce a product or deliver a service

The fundamental cost objects of ABC are ________.

activities

A favorable variance indicates that ________.

actual revenues exceed budgeted revenues

Which of the following is a fixed cost for an automobile manufacturing plant?

administrative salaries

Job-costing is likely to be used by________.

advertising agencies

Cost of spoiled units equals ________.

all costs incurred in producing them up to the point of INSPECTION

An efficiency variance reflects the difference between ________.

an actual input quantity and a budgeted input quantity

Which of the following companies will use a process costing system?

an oil refining company

Direct costs ________.

are costs related to a particular cost object that CAN be traced to that cost object in an economically feasible manner

A master budget is ________.

based.. on the level of expected output at the start of the budget period

Managers who feel that top management does not believe in the budget are most likely to ________.

be inactive participants in the budgeting process

In the cash budget, the cash excess (surplus) or deficiency (deficit) is calculated using which of the following formulas?

beginning cash + receipts - disbursements - minimum cash balance

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 budgeted indirect-cost rate for each cost pool is computed as ________.

budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base

The margin of safety is the difference between ________.

budgeted revenues and breakeven revenues

The ________ is a component of financial budgets.

budgeted statement of cash flows

Budgeted production equals ________.

budgeted unit sales + targeted ending finished goods inventory - beginning finished goods inventory

The flexible budget contains ________.

budgeted... amounts for actual output

The contribution margin income statement__________.

can be... used to predict operating income at different levels of activity

The ________ is required to prepare the cash budget of an organization.

capital... expenditures budget

The Standards of Ethical Conduct for management accountants include concepts related to ________.

competence, confidentiality, integrity, and credibility

Demand for refinements to the costing system has accelerated due to ________.

competition in product market

The Japanese use the term kaizen when referring to________.

continuous improvement

The selling price per unit less the variable cost per unit is the ________.

contribution margin per unit

A ________ is anything for which a measurement of costs is desired.

cost object

The determination of a cost as either direct or indirect depends upon the ________.

cost object chosen

A ________ is a grouping of individual indirect cost items.

cost pool

For external reporting ________.

costs are classified as either inventoriable or period costs

When spoiled goods have a disposal value, the net cost of the spoilage is computed by ________.

deducting disposal value from the costs of the spoiled goods... accumulated to the inspection point

Which of the following best describes transferred-in costs?

costs incurred ....in a previous department or process that are carried forward as the product's cost as that product moves to another department or process in the production cycle

Which of the following would most likely be the user of financial accounting information?

current shareholder

Which of the following is an example of spoilage?

defective men's... button down cotton collar dress shirts that have small pulls in the material and must be sold as discounted "seconds" in the factory store

Book value is defined as the ________.

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

When costs can be traced to a particular cost object in an economically feasible way, the cost is a:

direct cost

Prime costs include ________.

direct materials and direct manufacturing labor costs

The Materials Control account is increased when ________.

direct materials are purchased

Total manufacturing costs are comprised of ________.

direct materials costs, direct manufacturing labor costs, and manufacturing overhead costs

Which of the following issues is addressed by the Sarbanes-Oxley legislation?

disclosure practices of public corporations

A unit cost is computed by ________.

dividing total cost... by the number of units produced

Service-sector companies ________.

do not produce tangible products but cost accounting is still utilized in service firms.

All of the following are examples of quantitative factors except:

employee morale

Which of the following is a guideline used by management accountants to assist in strategic and operational decision making?

employing a cost-benefit.. approach

Activity-based costing (ABC) can eliminate cost distortions because ABC systems ________.

establish a cause-and-effect relationship with the activities performed

Which of the following is required to arrive at the budgeted units to be produced in a year?

estimated finished goods... inventory required at the end of the year

Financial accounting is concerned primarily with ________.

external reporting to investors, creditors, and government authorities

Which of the following is true if the production volume decreases?

fixed cost per unit increases

Breakeven point in units is ________.

fixed costs ...divided by contribution margin per unit

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

Management accounting ________.

focuses on estimating future revenues, costs, and other measures to forecast activities and their results

In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the ________ allocated to a job.

manufacturing overhead costs

Indirect manufacturing costs ________.

may include both variable and fixed costs

A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of a direct cost for the golf equipment line is ________.

monthly lease payments for a specialized piece of equipment needed to manufacture the golf driver

Which of the following is a fixed cost with respect to units produced in a factory?

monthly rent payment for the building

The practice of developing reasonably challenging budgets tend to help:

motivate improved.... performance as employees work more intensely to avoid failure

Financial accounting ________

must comply with GAAP (generally accepted accounting principles)

The balance sheet of a service-sector companies would show ________.

no inventory accounts

Spoilage that is an inherent result of the particular production process and arises even under efficient operating conditions is referred to as ________.

normal spoilage

Budgets should ________.

not be so rigid that if conditions change, adjustments in spending can be made

Unit cost data can most mislead decisions by ________.

not computing unit costs at the same output level

The most likely cost driver of distribution costs is the ________.

number of miles driven

The most likely cost driver of direct labor costs is the ________.

number of production hours

Which of the following is most likely to be a cost driver for the variable portion of marketing costs?

number of units sold

Financial accounting provides the primary source of information for ________.

preparing the income... statement for shareholders and other external parties

Early inspections can ________.

prevent any further costs being wasted on units that are already spoiled

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

price ...variance and an efficiency variance

Overcosting a particular product may result in:

pricing the product too high

Which of the following is the costing system used for mass produced like or similar units of products?

process-costing systems

To prepare the direct materials labor costs budget, which of the following budget must be prepared first?

production budget

A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of indirect cost for the soccer equipment line is the ________.

property taxes paid on the land and building (plant)

Merchandising-sectors ________.

purchase and then sell tangible products without changing their basic form

Which of the following cost and cost allocation base have a strong cause and effect relationship?

quality control costs and the number of inspections

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

relevant costs

Managers are examining a possible replacement of a machine decision and generate the following numbers: Book value of old machine $1,00,000 Current disposal value of old machine $50,000 Loss on disposal of old machine $300,000 Cost of new machine $600,000 In performing an analysis and in attempt to answer the question, "should we replace the old machine", which of the following statements would be true

the cost... of the new machine and the current disposal value of the old machine are relevant

A variance is ________.

the difference between an actual result and a budgeted performance

The weighted-average process-costing method calculates the equivalent units by ________.

the equivalent ...units completed during the current period plus the equivalent units in ending inventory

Which of the following could be a reason for a favorable material price variance?

the purchasing manager bargaining...effectively with suppliers

The budgeting process is most strongly influenced by ________.

the sales forecast

ABC and traditional systems are quite similar in ________.

the treatment of direct costs

If unit outputs exceed the breakeven point ________.

there will be a profit

Which of the following is the fundamental purpose of responsibility accounting?

to gather information that will enable future improvement

Variance analysis should be used ________.

to understand... why variances arise and to improve future performance

Which of the following items will be same for a flexible budget and a master budget?

total expected fixed costs

Which of the following is true if the volume of sales increases (within a relevant range)?

total variable cost increases

A cost is considered direct if it can be traced to a particular cost object in a cost effective way which means it can be

traced in an economically feasible way

Which of the following describes rework?

units of production that do not.... meet the specifications required by customers but that are subsequently repaired and sold as good finished units

Which of the following defines spoilage?

units of production whether fully or partially completed, that do not meet the specifications required by customers for good units and are discarded or sold at reduced prices

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