Final

Which of the following includes both traced direct costs and allocated indirect​ costs?

Cost Assignments

The collection of cost data in an organized​ way, such as in various categories such as​ materials, labor, and manufacturing​ overhead, is​ called:

Cost accumulation

Which of the following statements is true of​ sell-or-process-further decisions in joint​ costing?

Costs that differ between the alternatives of selling products or processing further are relevant.

To discourage producing for​ inventory, management can​ ________.

develop budgeting and planning activities that reduce​ management's freedom to inappropriately build inventory through increased production

The method that allocates each​ department's budgeted costs to operating departments only is​ called:

direct method

Which of the following is a performance​ measure?

economic value added

A successful implementation of a JIT production system should result in a lowering of the inventory turnover ratio.

false

Companies use safety stock as a buffer against unexpected decreases in demand.

false

In a period of falling​ prices, the lower cost of goods sold under the FIFO method leads to higher operating income and higher tax payments.

false

Lean accounting takes in to consideration all costs associated with inventories.

false

The EOQ model factors in the probability of stockouts.

false

The balanced scorecard in most organizations is broken down into the following​ categories: commercial​ perspective, supplier​ perspective, external business−process ​perspective, and productivity perspective.

false

The production method for recognizing byproducts is simpler and is often used in​ practice, primarily because the dollar amounts of byproducts are immaterial.

false

Use of practical capacity results in an unrealistically small fixed manufacturing cost per unit because it is based on an idealistic and unattainable level of capacity.

false

Using master budget capacity as the denominator level sets the cost of capacity at the cost of supplying the​ capacity, regardless of the demand for the capacity.

false

When fixed overhead spending variance is​ unfavorable, it can be safely assumed that​ ________.

flexible budget amount is lower than actual costs incurred

Excluding spoiled units in the equivalent−unit calculation results in​ ________.

higher cost per good unit

Return on investment can be increased by​ ________.

increasing return on sales

Appraisal​ activities:

inspect inputs and attributes of individual units of products or services to detect whether they conform to specifications or customer expectations.

Rework is an example of​ ________.

internal failure costs

The cost allocation base​ ________.

is a systematic way to link an indirect cost or group of indirect costs to cost objects

The return on investment is usually considered the most popular approach to measure performance​ because:

it blends all the ingredients of profitability into a single percentage

An order is received by a company and then spends 1 day in assembly and 3 days in finishing before being stored in the warehouse. On​ average, the units are stored for 3 days before being shipped to a customer. Which of the following measures would be​ true?

manufacturing cycle time of 4 days

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

Which of the following is a financial measure of​ quality?

operating income growth

Among different types of costs associated with​ inventory, the costs of obtaining purchase approvals are​ ________.

ordering costs

Budgeted costs are​ ________.

planned or expected costs

Using​ ________ as the denominator level also gives the manager a more accurate idea of the resources needed and used to produce a unit by excluding the cost of unused capacity.

practical capacity

Process engineering is an example of​ :

prevention costs

Among different types of costs associated with​ inventory, the incoming freight charges of inventories are​ ________.

purchasing costs

The sales−volume variance is sometimes due to​ ________.

quality problems leading to customer dissatisfaction

Prevention​ activities:

seek to prevent defects in the products or services being produced.

The method that allocates costs in each cost pool using the same rate per unit is known as​ the:

single−rate cost allocation method

Under which allocation method are one−way reciprocal support services​ recognized?

step - down method

Special cost−allocation problems arise when​ ________.

support departments provide reciprocal services to each other and operating departments

Ways to​ "produce for​ inventory" that result in increasing operating income include​ ________.

switching production to products that absorb the most amounts of fixed manufacturing costs

The weighted−average cost of capital​ (WACC) equals​ ________.

the after−tax average cost of all the long−term source of funds

Which of the following is true of the calculation of the cost per good unit​ (a unit that is completed and transferred​ out) under the weighted−average process costing​ method?

the equivalent units in the denominator include goods completed and transferred out and all units that were spoiled

When a product is the result of a joint​ process, the decision to process the product past the split−off point further should be influenced by which of the following​ measures?

the incremental operating income earned past the split−off point

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

the purchasing manager bargaining effectively with suppliers

Efficiency is​ ________.

the relative amount of inputs used to achieve a given output level

The​ purchase-order lead time is the​ ________.

the time between placing an order and its delivery

Which of the following statements is false with regards to departmental cost​ allocations?

the total amount allocated among departments will differ in total depending on the cost allocation method used

Which of the following describes appraisal​ costs?

they are incurred to detect which of the individual units of products do not conform to specifications

Which of the following is the formula for investment assuming that total assets employed is the​ measure?

total assets available minus the sum of idle assets and assets purchased for future expansion

If fixed overhead cost variances are always written off to Cost of Goods​ Sold, operating income can be manipulated for either financial reporting or income tax purposes.

true

Return on sales can provide how effectively costs are managed and is part of the DuPont method of profitability analysis.

true

The objective of maximizing return on investment may induce managers of highly profitable divisions to reject projects that from the viewpoint of the overall organization should be accepted.

true

The reorder point is the quantity level of inventory at which a new purchase order is made.

true

The​ demand-pull feature of JIT production systems results in close coordination among workstations and smooths the flow of goods.

true

Using practical capacity as the denominator level sets the cost of capacity at the cost of supplying the​ capacity, regardless of the demand for the capacity.

true

A direct cost of one cost object cannot be an indirect cost of another cost object.

False

A favorable​ production-volume variance arises when manufacturing capacity planned for is NOT used.

False

Both direct and the step−down method can provide relevant information for outsourcing decisions.

False

Costs of Quality​ (COQ) are classified into four​ categories: prevention​ costs, appraisal​ costs, opportunity​ costs, and sales costs.

False

Direct costs are allocated to the cost object using a​ cost-allocation method.

False

Fixed costs for the period are by definition a lump sum of costs that remain unchanged and therefore the fixed overhead spending variance is always zero.

False

If the production planners set the budgeted machine hours standards too​ loose, one could anticipate there would be a favorable fixed overhead efficiency variance.

False

In a period of rising​ prices, the​ weighted-average method will result in higher tax payments.

False

In job−costing ​systems, abnormal spoilage costs are considered to be inventoriable costs and normal spoilage costs are not considered to be inventoriable costs and are written off as costs of the accounting period in which the abnormal spoilage is detected.

False

Reducing the investment base to improve ROI involves decreasing idle​ cash, paying down​ debt, determining proper inventory​ levels, and spending carefully on long - term assets

False

The dual cost−allocation method classifies costs into two​ pools, a budgeted cost pool and an actual cost pool.

False

The first step in the five−step procedure for process costing with spoilage is to compute the output in terms of equivalent units.

False

The last step in the five−step procedure for process costing with spoilage is to summarize total costs to account for.

False

The step−down method allocates support department costs to only operating departments in a sequential manner.

False

The weighted average method of process costing assigns the cost of equivalent units worked on during the current period first to complete beginning​ inventory, next to start and complete new​ units, and finally to units in ending​ work-in-process inventory.

False

Underestimating the degree of completion of ending work in process leads to increase in operating income.

False

When inventories are​ present, classifying spoilage as normal rather than abnormal results in a decrease in current operating income.

False

Which of the following statements about the​ direct/indirect cost classification is​ true?

Indirect costs are always allocated

Which of the following is an advantage of a dual−rate method?

It allocates fixed cost as per the budgeted usage that helps in short and long-run planning

Which of the following is a disadvantage of a dual-rate method?

It allocates fixed costs on the basis of budgeted long−run usage, which may tempt some managers to underestimate their planned usage.

Which of the following statements is true of the sales method of accounting for​ byproducts?

It allows a firm to manage its reported earnings by timing the sale of byproducts.

Which of the following is true of​ weighted-average process-costing?

It calculates the cost per equivalent unit of all work done to​ date, regardless of the accounting period in which it was done.

Which of the following is true of​ master-budget capacity​ utilization?

It hides the amount of unused capacity.

For inventory carrying​ costs, which of the following statements is true of the relevant opportunity cost of capital of​ inventory?

It is calculated as the required rate of return multiplied by the​ per-unit costs of acquiring inventory including the purchase​ price, incoming​ freight, and incoming inspection.

Which of the following statements is true of the production method of accounting for​ byproducts?

It is the preferred method because of the matching principle.

Which of the following is a disadvantage of single−rate method?

It may lead operating department managers to make sub−optimal decisions that are in their own best interest.

Which of the following sentences is true of normal spoilage and abnormal​ spoilage?

Normal spoilage costs are inventoriable and are added to the cost of good units​ produced, while abnormal spoilage costs are deducted from the cost of good units produced.

The​ production-volume variance is a component of the​ sales-volume variance.

True

The​ weighted-average process costing method does not distinguish between units started in the previous period but completed during the current period and units started and completed during the current period.

True

Under the FIFO method of​ process-costing, costs incurred and units produced in the current period are used to calculate the cost per equivalent unit of work in the current period in contrast the​ weighted-average method which merges the units and costs of the previous period with that of the current period.

True

Under the FIFO​ method, all spoilage costs are assumed to be related to the units completed during this period using the unit costs of the current period.

True

​Weighted-average cost per equivalent unit is obtained by dividing the sum of costs for beginning work in process plus costs for work done in the current period by total equivalent units of work done to date.

True

Which of the following statements best defines lean​ accounting?

a costing method that supports creating value for the customer by costing the entire value stream thereby eliminating waste in the accounting process

The amount reported for fixed overhead on the static budget is also reported​ ________.

as flexible budget costs

Which of the following steps are part of the​ first-in, first-out​ (FIFO) process-costing​ method?

assignment of costs of the previous​ period's equivalent units in beginning​ work-in-process inventory to the first units completed and transferred out of the process

Which of the following statements best defines a​ just-in-time production​ system?

a​ demand-pull system in which each component in a production line is produced immediately as needed by the next step in the production line

When using the dual−rate method, the fixed cost allocation is based on​ ________.

budgeted usage

Which of the following steps in designing an accounting−based performance measure includes decisions of selecting net income as a measure of financial​ performance?

choosing performance measures that align with the​ firm's financial goals

An unfavorable salesminus−volume variance could result from​ ________.

competitors taking market share

A company which favors the residual income approach to financial performance evaluation wants managers to​ ________.

concentrate on maximizing an absolute amount of dollars of residual income as opposed to a percentage yield as is the case with ROI

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

cost object chosen

Assigning direct costs to a cost object is called​ ________.

cost tracing

Economic value added is equal to​ ________.

After−tax operating income − [Weighted−average cost of capital x​ (Total assets −Current​ liabilities)]

Which of the following is the required rate of return used in the economic value added​ (EVA) calculation?

After−tax weighted−average cost of capital

Which of the following departments would not be considered a service or support​ department?

Assembly

The broader the cost object definition​ (i.e., plant versus​ product), the more confident the manager will be about the accuracy of the direct cost amounts.

True

Which one of the following items is a direct​ cost?

Printing costs incurred for payroll check​ processing; payroll check processing is the cost object.

Which of the following statements is true of costs associated with goods for​ sale?

Purchasing costs include incoming freight costs and are reduced by discounts.

The cost of units completed can differ materially between the weighted average and the FIFO methods of process costing.

True

A cost is a resource sacrificed or forgone to achieve a specific objective.

True

A cost may be direct for one cost object and indirect for another cost object.

True

A cost object is anything for which a cost measurement is desired.

True

Allocated fixed overhead can be expressed in terms of​ allocation-base units or in terms of the budgeted fixed cost per unit.

True

An actual cost is the cost incurred minus−a historical or past cost.

True

Complete reciprocated costs is the support​ department's own costs plus any interdepartmental cost allocations.

True

Equivalent units is a derived measure of output calculated by converting the quantity of inputs into the amount of completed output that could be produced with that quantity of input.

True

Improvements in information−gathering technologies are making it possible to trace more costs as direct.

True

Quality is defined as the total features and characteristics of a product or a service made or performed according to specifications to satisfy customers at the time of purchase and during use.

True

Separable costs that do not differ between alternatives are irrelevant for decision making.

True

Spoilage is typically assumed to occur at the stage of completion where inspection takes place.

True

The purpose of the​ equivalent-unit computation is to​ :

use a common metric to estimate the amount of work done on units in a period

Which of the following is the correct mathematical expression to calculate annual relevant ordering​ costs?

​(Demand in units for a specified period​ / Size of each​ order) × Relevant ordering cost per purchase order

Under the​ weighted-average method, how would you calculate the cost per equivalent units with regards to conversion​ costs?

​(total conversion costs in beginning work in process​ + conversion cost for work done in the current​ period)/(units completed and transferred out during the period​ + equivalent units in ending​ inventory)

The fixed overhead cost variance can be further subdivided into the​ ________.

​flexible-budget variance and the​ production-volume variance

Which of the following is the best definition of inventory​ management?

​planning, coordinating, and controlling activities related to the flow of inventory​ into, through, and out of an organization