ACCY 309 Final

The five-step decision process A. includes planning and control activities. B. is performed exclusively by management accountants. C. is not often used, as the costs exceed the benefits. D. must be performed following GAAP guidelines.

A. includes planning and control activities.

Which of the following is not one of the ethical responsibilities of a management accountant? A. Compliance B. Confidentiality C. Integrity D. Objectivity

A. Compliance

Which of the following is not a common problem encountered in collecting data for cost estimation? A. Lack of observing extreme values B. Missing data C. Changes in technology D. Distortions resulting from inflation

A. Lack of observing extreme values

Which of the following accounts is not classified as an asset? A. Manufacturing Overhead Control B. Materials Control C. Work-in-Process Control D. Finished Goods Control

A. Manufacturing Overhead Control

Which of the following is not an assumption of cost-volume-profit analysis? A. The time value of money is incorporated in the analysis. B. Costs can be classified into variable and fixed components. C. The behavior of revenues and expenses is accurately portrayed as linear over the relevant range. D. The number of output units is the only driver.

A. The time value of money is incorporated in the analysis.

Period costs are A. all costs in the income statement other than cost of goods sold. B. defined as manufacturing costs incurred this period on the schedule of cost of goods manufactured. C. always recorded as assets when first incurred. D. those costs that benefit future periods.

A. all costs in the income statement other than cost of goods sold.

Galway Co. management desires cost information regarding its Celtic brand. The Celtic brand is a(n) A. cost object. B. cost driver. C. cost assignment. D. actual cost.

A. cost object

The primary focus of cost management is to A. help managers make different decisions. B. calculate product costs. C. aid managers in budgeting. D. distinguish between relevant and irrelevant information.

A. help managers make different decisions.

With the cumulative average-time learning model A. the cumulative time per unit declines by a constant percentage when production doubles. B. the time needed to produce the last unit declines by a constant percentage when production doubles. C. costs increase in total by a constant percentage as production increases. D. the total cumulative time increases in proportion to production increases.

A. the cumulative time per unit declines by a constant percentage when production doubles.

The Beta Mu Omega Chi (BMOC) fraternity is looking to contract with a local band to perform at its annual mixer. If BMOC expects to sell 250 tickets to the mixer at $10 each, which of the following arrangements with the band will be in the best interest of the fraternity? A. $2500 fixed fee B. $1000 fixed fee plus $5 per person attending C. $10 per person attending D. $25 per couple attending

B. $1000 fixed fee plus $5 per person attending

LSB Company has the following income statement: Revenues $100,000 <Variable Costs 40,000> Contribution Margin 60,000 <Fixed Costs 30,000> Operating Income 30,000 What is LSB's DOL? A. 3.33 B. 2.00 C. 0.50 D. 1.00

B. 2.00

In supporting managers, management accountants have three guidelines. These guidelines are: A. Cost-benefit analysis, performance reporting, behavioral considerations, and technical considerations. B. Cost-benefit analysis, behavioral considerations and technical considerations, and different costs for different purposes. C. Financial statement preparation, technical considerations, strategic direction, and budgeting. D. Following functional lines of authority, cost-benefit analysis, behavioral considerations, and use of the value chain.

B. Cost-benefit analysis, behavioral considerations and technical considerations, and different costs for different purposes.

Which of the following is not true about strategy? A. It involves matching its capabilities with the opportunities in the marketplace to accomplish its objective. B. It has a short-term focus. C. It can be implemented through price competition or product differentiation. D. It involves the use of strategic cost management.

B. It has a short-term focus.

Rosland Graphics successfully bid on a job printing standard notebook covers during the year using last year's price of $0.27 per cover. This amount was calculated from prior year costs, noting that no changes in any costs had occurred from the past year to the current year. At the end of the year, the company manager was shocked to discover that the company had suffered a loss. "How could this be?" she exclaimed. "We had no increases in cost and our price was the same as last year. Last year we had a healthy income." What could explain the company's loss in income this current year? A. Their costs were all variable costs and the amount produced and sold increased. B. Their costs were mostly fixed costs and the amount produced this year was less than last year. C. They used a different cost object this year than the previous year. D. Their costs last year were actual costs but they used budgeted costs to make their bids.

B. Their costs were mostly fixed costs and the amount produced this year was less than last year.

A cost-allocation base may be any of the following except a A. cost driver. B. cost pool. C. way to link indirect costs to a cost object. D. nonfinancial quantity.

B. cost pool.

The cost of a product can be measured as any of the following except as one A. gathered from all areas of the value chain. B. identified as period cost. C. designated as manufacturing cost only. D. explicitly defined by contract.

B. identified as period cost.

The value chain A. involves external companies as well as internal activities. B. is the sequence of business functions in which customer usefulness is added to products or services. C. applies only to manufacturing companies. D. is not relevant in today's cost accounting environment.

B. is the sequence of business functions in which customer usefulness is added to products or services.

When using the incremental unit-time learning model A. the cumulative time per unit declines by a constant percentage when production doubles. B. the time needed to produce the last unit declines by a constant percentage when production doubles. C. the time to produce one additional unit decreases by a constant percentage. D. costs increase incrementally in an undetermined pattern.

B. the time needed to produce the last unit declines by a constant percentage when production doubles.

The Treasurer A. is the executive responsible for overseeing the financial operations of an organization. B. undertakes banking, financing, investments, and cash management duties. C. provides financial information to managers and shareholders and oversees the overall operations of the accounting system. D. is a different title for the Controller.

B. undertakes banking, financing, investments, and cash management duties.

Liberty Box Company calculated an indirect-cost rate of $12.50 per labor hour for fringe benefits for use in their normal costing system. At the end of the year, the actual cost of fringe benefits was $980,000. The total of labor hours worked for the year was the same amount as budgeted, 70,000 hours. If Job #640 required the use of 15 labor hours and the company used the adjusted allocation rate approach, by what amount would the cost of Job #640 change? A. $560.00 B. $281.25 C. $22.50 D. $20.50

C. $22.50

LSB Company has the following income statement: Revenues $100,000 <Variable Costs 40,000> Contribution Margin 60,000 <Fixed Costs 30,000> Operating Income 30,000 If LSB's sales increase by $20,000, what will be the company's operating profit? A. $42,000 B. $12,000 C. $50,000 D. $30,000

C. $50,000

The three categories of inventories commonly found in many manufacturing companies are: A. Direct materials, direct labor, and indirect manufacturing costs. B. Purchased goods, period costs, and cost of goods sold. C. Direct materials, work-in-process, and finished goods. D. LIFO, FIFO, and weighted average.

C. Direct materials, work-in-process, and finished goods.

_____ management exists to provide advice and assistance to those responsible for attaining the objectives of the organization. A. Line B. Functional C. Staff D. Risk

C. Staff

Which of the following is not a factor in cost-volume-profit analysis? A. Units sold B. Selling price C. Total variable costs D. Fixed costs of a product

C. Total variable costs

Using normal costing rather than actual costing requires that the allocating of indirect manufacturing costs to work-in-process be A. done on a more timely basis, such as every two weeks rather than every month. B. journalized only at year end when adjusting entries are normally made. C. calculated by using the budgeted rate times actual quantity of allocation base. D. calculated by using the budgeted rate times the budgeted quantity of allocation base.

C. calculated by using the budgeted rate times actual quantity of allocation base.

Three criteria to use in identifying cost drivers from the potentially large set of independent variables that can be included in a regression model are A. goodness of fit, size of the intercept term, and specification analysis. B. independence between independent variables, economic plausibility, and specification analysis. C. economic plausibility, goodness of fit, and significance of independent variable. D. spurious correlation, expense of gathering data, and multicollinearity.

C. economic plausibility, goodness of fit, and significance of independent variable.

The first step in the seven-step approach to job costing is to A. select the cost-allocation base to use in assigning indirect costs to the job. B. identify the direct costs of the job. C. identify the job that is the chosen cost object. D. identify the indirect-cost pools associated with the job.

C. identify the job that is the chosen cost object.

[CMA Adapted] Of the following methods, the one that would not be appropriate for analyzing how a specific cost behaves is A. the scatter graph method. B. the industrial engineering approach. C. linear programming. D. statistical regression analysis.

C. linear programming.

Companies that take advantage of quantity discounts in purchasing their materials have A. decreasing cost functions. B. linear cost functions. C. nonlinear cost functions. D. stationary cost functions.

C. nonlinear cost functions.

Contribution margin is calculated as A. total revenue - total fixed costs. B. total revenue - total manufacturing costs (CGS). C. total revenue - total variable costs. D. operating income + total variable costs.

C. total revenue - total variable costs.

Why do most companies adhere to GAAP for their basic internal financial statements? A. GAAP is required by law for publicly held companies. B. To use GAAP and another system of reporting would be too costly for most companies. C. Accountants are required by their code of ethics to use GAAP accounting. D. Accrual accounting provides a uniform method to measure an organization's financial performance.

D. Accrual accounting provides a uniform method to measure an organization's financial performance.

Manufacturing Overhead Control A. represents actual overhead costs incurred. B. has a normal debit balance. C. is a control account with a subsidiary ledger detailing the components of manufacturing overhead. D. All of the above

D. All of the above

The Institute of Management Accountants issues which certification? A. CPA B. CIA C. CFE D. CMA

D. CMA

Which type of company converts raw materials into finished products? A. Not-for-profit B. Service C. Merchandising D. Manufacturing

D. Manufacturing

Which of the following is not a key success factor in a company's effort to deliver increased levels of performance to the customer? A. Time B. Innovation C. Quality D. Price reduction

D. Price reduction

The costs incurred on jobs that are currently in production but are not yet complete would appear in the A. Materials Control account. B. Finished Goods Control account. C. Manufacturing Overhead Control account. D. Work-in-Process Control account.

D. Work-in-Process Control account.

If each professional in a service company is paid on an annual salary basis, why might the firm want to use a predetermined or budgeted rate for direct or professional labor? A. A predetermined or budgeted rate is easier to justify to a client who might question a billing rate. B. Professional staff persons do not keep accurate records of the jobs on which they work. C. Professional staff incurs more client costs, such as travel, lodging, and out-of-town meals, while working on a job. D. Year-end bonuses paid to the professional staff are difficult to trace to individual jobs.

D. Year-end bonuses paid to the professional staff are difficult to trace to individual jobs.

Production-cost cross-subsidization results from A. allocating indirect costs to multiple products. B. assigning traced costs to each product. C. assigning costs to different products using varied costing systems within the same organization. D. assigning broadly averaged costs across multiple products without recognizing amounts of resources used by which products.

D. assigning broadly averaged costs across multiple products without recognizing amounts of resources used by which products.

When the high-low method is used to estimate a cost function, the variable cost per unit is found by A. performing regression analysis on the associated cost and cost driver database. B. subtracting the fixed cost per unit from the total cost per unit based on either the highest or lowest observation of the cost driver. C. dividing the difference between the highest and lowest observations of the cost driver by the difference between costs associated with the highest and lowest observations of the cost driver. D. dividing the difference between costs associated with the highest and lowest observations of the cost driver by the difference between the highest and lowest observations of the cost driver.

D. dividing the difference between costs associated with the highest and lowest observations of the cost driver by the difference between the highest and lowest observations of the cost driver.

The cost of printer paper on a college campus would be a direct cost to the college but would need to be allocated as an indirect cost to A. departments. B. buildings. C. schools. D. individual student instruction.

D. individual student instruction.

A company that manufactures dentures for use by local dentists would use A. process costing. B. personal costing. C. operations costing. D. job costing.

D. job costing.

Inventoriable costs are A. only purchased goods for resale. B. a category of costs used only for manufacturing companies. C. recorded as expenses when incurred and later reclassified as assets. D. recorded as assets when incurred.

D. recorded as assets when incurred.

One way for managers to cope with uncertainty in profit planning is to A. use CVP analysis because it assumes certainty. B. recommend management hire a futurist whose work is to predict business trends. C. wait to see what does happen and prepare a report based on actual amounts. D. use sensitivity analysis to explore various what-if scenarios in order to analyze changes in revenues or costs or quantities.

D. use sensitivity analysis to explore various what-if scenarios in order to analyze changes in revenues or costs or quantities.

Sebastian Company, which manufactures electrical switches, uses a standard cost system and carries all inventories at standard. The standard manufacturing overhead costs per switch are based on direct labor hours and are shown below: Variable overhead (5 hours @ $12 per direct manufacturing labor hour) $ 60 Fixed overhead (5 hours @ $15* per direct manufacturing labor hour) 75 Total overhead per switch $135 *Based on capacity of 200,000 direct manufacturing labor hours per month. The following information is available for the month of December: 46,000 switches were produced although 40,000 switches were scheduled to be produced. 225,000 direct manufacturing labor hours were worked at a total cost of $5,625,000. Variable manufacturing overhead costs were $2,750,000. Fixed manufacturing overhead costs were $3,050,000. The total variable manufacturing overhead variance was a. $10,000 F. b. $10,000 U. c. $110,000 U. d. $110,000 F.

a. $10,000 F.

[AICPA Adapted] Dewitt Co. budgeted its activity for October 2004 from the following information: Sales are budgeted at $750,000. All sales are credit sales and a provision for doubtful accounts is made monthly at the rate of 2% of sales. Merchandise inventory was $120,000 at September 30, 2004, and an increase of $10,000 is planned for the month. All merchandise is marked up to sell at invoice cost plus 50%. Estimated cash disbursements for selling and administrative expenses for the month are $105,000. Depreciation for the month is projected at $25,000. Dewitt is projecting operating income for October 2004 in the amount of a. $105,000. b. $119,000. c. $129,000. d.$230,000.

a. $105,000.

[CPA Adapted] Mikaelabelle Products sells product A at a selling price of $40 per unit. Mikaelabelle's cost per unit based on the full capacity of 500,000 units is as follows: Direct materials $ 6 Direct labor 3 Indirect manufacturing (60% of which is fixed) 10 $19 A one-time-only special order offering to buy 50,000 units was received from an overseas distributor. The only other costs that would be incurred on this order would be $4 per unit for shipping. Mikaelabelle has sufficient existing capacity to manufacture the additional units. In negotiating a price for the special order, Mikaelabelle should consider that the minimum selling price per unit should be a. $17 b. $19 c. $21 d. $23

a. $17

[CMA Adapted] Bartholomew Corporation's master budget calls for the production of 6,000 units of product monthly. The master budget includes indirect labor of $396,000 annually; Bartholomew considers indirect labor to be a variable cost. During the month of September, 5,600 units of product were produced, and indirect labor costs of $30,970 were incurred. A performance report utilizing flexible budgeting would report a flexible-budget variance for indirect labor of a. $170 unfavorable. b. $170 favorable. c. $2,030 unfavorable. d. $2,030 favorable.

a. $170 unfavorable.

The Precision Widget Company had the following balances in their accounts at the end of the accounting period: Work-in-Process $ 5,000 Finished Goods 20,000 Cost of Goods Sold 200,000 If their manufacturing overhead was overallocated by $8,000 and Precision Widget adjusts their accounts using a proration based on total ending balances, the revised ending balance for Cost of Goods Sold would be a. $192, 880. b. $200, 000. c. $207,120. d. $208,000.

a. $192, 880.

A mixed cost function has a constant component of $20,000. If the total cost is $60,000 and the independent variable has the value 200, what is the value of the slope coefficient? a. $200 b. $400 c. $600 d.$40,000

a. $200

Top That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2009 follow: Work-in-process, January 31—50,000 units 100% complete for direct materials; 40% completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050 Units started during February, 225,000 Units completed during February 200,000 Work-in-process, February 28 75,000 units 100% complete for direct materials; 20% completed for conversion costs Direct materials added during February [actual costs] $342,000 Conversion costs added during February [actual costs] $352,950 Assuming Top That used the weighted-average method to account for inventories, the cost per equivalent whole unit produced during February is a. $3.30. b. $3.55. c. $3.77. d. $4.00.

a. $3.30.

Sebastian Company, which manufactures electrical switches, uses a standard cost system and carries all inventories at standard. The standard manufacturing overhead costs per switch are based on direct labor hours and are shown below: Variable overhead (5 hours @ $12 per direct manufacturing labor hour) $ 60 Fixed overhead (5 hours @ $15* per direct manufacturing labor hour) 75 Total overhead per switch $135 *Based on capacity of 200,000 direct manufacturing labor hours per month. The following information is available for the month of December: 46,000 switches were produced although 40,000 switches were scheduled to be produced. 225,000 direct manufacturing labor hours were worked at a total cost of $5,625,000. Variable manufacturing overhead costs were $2,750,000. Fixed manufacturing overhead costs were $3,050,000. The fixed overhead production-volume variance for December was a. $450,000 F. b. $400,000 F. c. $50,000 U. d. $775,000 F.

a. $450,000 F

Sebastian Company, which manufactures electrical switches, uses a standard cost system and carries all inventories at standard. The standard manufacturing overhead costs per switch are based on direct labor hours and are shown below: Variable overhead (5 hours @ $12 per direct manufacturing labor hour) $ 60 Fixed overhead (5 hours @ $15* per direct manufacturing labor hour) 75 Total overhead per switch $135 *Based on capacity of 200,000 direct manufacturing labor hours per month. The following information is available for the month of December: 46,000 switches were produced although 40,000 switches were scheduled to be produced. 225,000 direct manufacturing labor hours were worked at a total cost of $5,625,000. Variable manufacturing overhead costs were $2,750,000. Fixed manufacturing overhead costs were $3,050,000. [CMA Adapted] The variable overhead spending variance for December was a. $50,000 U. b. $350,000 U. c. $10,000 F. d. $60,000 F.

a. $50,000 U.

Sebastian Company, which manufactures electrical switches, uses a standard cost system and carries all inventories at standard. The standard manufacturing overhead costs per switch are based on direct labor hours and are shown below: Variable overhead (5 hours @ $12 per direct manufacturing labor hour) $ 60 Fixed overhead (5 hours @ $15* per direct manufacturing labor hour) 75 Total overhead per switch $135 *Based on capacity of 200,000 direct manufacturing labor hours per month. The following information is available for the month of December: 46,000 switches were produced although 40,000 switches were scheduled to be produced. 225,000 direct manufacturing labor hours were worked at a total cost of $5,625,000. Variable manufacturing overhead costs were $2,750,000. Fixed manufacturing overhead costs were $3,050,000. What amount should be credited to the Allocated Manufacturing Overhead Control account for the month of December? a. $6,210,000 b. $5,800,000 c. $5,760,000 d.$5,700,000

a. $6,210,000

Top That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2009 follow: Work-in-process, January 31—50,000 units 100% complete for direct materials; 40% completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050 Units started during February, 225,000 Units completed during February 200,000 Work-in-process, February 28 75,000 units 100% complete for direct materials; 20% completed for conversion costs Direct materials added during February [actual costs] $342,000 Conversion costs added during February [actual costs] $352,950 Assuming Top That uses the first-in, first-out (FIFO) method to account for inventories, the assignment of costs to units completed and transferred to the Sewing Department during February is a. $658,350. b. $636,450. c. $666,000. d. $652,000.

a. $658,350.

Brant Corporation manufactures two products out of a joint process—Scout and Andro. The joint (common) costs incurred are $400,000 for a standard production run that generates 70,000 pounds of Scout and 30,000 pounds of Andro. Scout sells for $9.00 per pound whereas Andro sells for $7.00 per pound. [CMA Adapted] If additional processing costs beyond the splitoff point are $1.00 per pound for Scout and $2.333 per pound for Andro, the amount of joint cost of each production run allocated to Andro on an estimated net realizable value basis is a. $80,000. b. $147,350. c. $175,000. d. $320,000.

a. $80,000.

Tee Times, Inc. produces and sells the finest quality golf clubs in all of Clay County. The company expects the following revenues and costs in 2004 for its Elite Quality golf club sets: Revenues (400 sets sold @ $600 per set) $240,000 Variable costs 160,000 Fixed costs 50,000 How many sets of clubs must be sold to earn a target operating income of $90,000? a. 700 b. 500 c. 400 d. 300

a. 700

Absorption costing enables managers to increase operating income in the short run by changing production schedules. Which statement is true regarding such action? a. The reason for increased operating income is the deferral of fixed manufacturing overhead contained in unsold inventory. b. A desirable effect of these changes in production is "cherry picking" the production line. c. This is done through decreases in the production schedule as customer demand for product falls. d. None of the above statements are true regarding the manager's action to increase operating income through changes in the production schedule.

a. The reason for increased operating income is the deferral of fixed manufacturing overhead contained in unsold inventory.

[CPA Adapted] Operating income using variable costing as compared to absorption costing would be higher a. when the quantity of beginning inventory equals the quantity of ending inventory. b. when the quantity of beginning inventory is more than the quantity of ending inventory. c. when the quantity of beginning inventory is less than the quantity of ending inventory. d. under no circumstances.

b. when the quantity of beginning inventory is more than the quantity of ending inventory.

The average cost data are for In-Sync Fixtures Company's (a retailer) only two product lines, Marblette and Italian Marble. Marblette Italian Marble Purchase volume Marblette: 20,000 Italian: 1,000 Purchase cost per unit Marblette: $50 Italian: $50 Shipments received Marblette: 12 Italian: 12 Hours used per shipment * Marblette: 5 Italian: 3 *These data were accumulated after a careful activity analysis. Currently, In-Sync Fixtures uses a traditional costing system with indirect costs allocated using purchased cost of goods as a basis. In-Sync Fixtures is considering refining the allocation of their receiving costs of $40,000. They realize that the Italian Marble is heavier and requires more care than the Marblette but that the Marblette comes in larger volume. Which statement can be made using the results of the activity analysis performed by In-Sync Fixtures? a. The use of this refined activity-based costing system will increase the accuracy of the resulting product costs because a more appropriate cost driver will be used as the allocation base. b. The traditional allocation method currently being used is causing product-cost cross-subsidization with the product line Marblette being undercosted. c. The cost allocated to the Italian Marble product line under the current traditional system is more than the activity-based costing allocated cost. d. The use of this refined activity-based costing system will increase the accuracy of the resulting product costs because it probably will cost less to trace the costs to the product lines.

a. The use of this refined activity-based costing system will increase the accuracy of the resulting product costs because a more appropriate cost driver will be used as the allocation base.

The basic principles and concepts of variance analysis can be applied to activity-based costing a. by application as to the levels of cost hierarchy. b. through careful classification of costs as direct and indirect as applied to the product or job. c. with use of standard costing systems only. d. only through those activities related to individual units of product or service.

a. by application as to the levels of cost hierarchy.

Performance evaluation using variance analysis should guard against a. emphasis on a single performance measure. b. emphasis on total company objectives. c. basing effect of a manager's action on total costs of the company as a whole. d. highlighting individual aspects of performance.

a. emphasis on a single performance measure.

Use of capacity levels based on demand a. hides the amount of unused capacity. b. highlights the cost of capacity acquired but not used. c. yields a cost rate that does not include a charge for unused capacity. d. results in a price that covers the cost of capacity customers expect to pay.

a. hides the amount of unused capacity.

The allocation of indirect costs in an activity-based costing system a. may require other costs to be allocated to activities before the costs of the activities can be allocated to the products. b. is simplified because more costs are identified as direct costs. c. requires the use of heterogeneous cost pools. d. is simplified because a limited number of activities are identified as cost objects.

a. may require other costs to be allocated to activities before the costs of the activities can be allocated to the products.

Brant Corporation manufactures two products out of a joint process—Scout and Andro. The joint (common) costs incurred are $400,000 for a standard production run that generates 70,000 pounds of Scout and 30,000 pounds of Andro. Scout sells for $9.00 per pound whereas Andro sells for $7.00 per pound. [CMA Adapted] If there are no additional processing costs incurred after the splitoff point, the amount of joint cost of each production run allocated to Scout on a physical-quantity basis is a. $300,000. b. $280,000. c. $120,000. d. $100,000.

b. $280,000.

Information pertaining to Brenton Corporation's sales revenue is presented in the following table. February March April Cash sales $160,000 $150,000 $120,000 Credit sales 300,000 400,000 280,000 Total sales $460,000 $550,000 $400,000 Management estimates that 5% of credit sales are not collectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Cost of purchases of inventory each month is 70% of the next month's projected total sales. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase. 12. [CMA Adapted] Brenton's budgeted total cash payments in March for inventory purchases are a. $385,000. b. $358,750. c. $306,250. d.$280,000.

b. $358,750.

Jackson Enterprises manufactures two products—a basic gizmo and an advanced model gizmo. The company is using an activity-based costing system. They have identified three activities for allocation of indirect costs. Activity Cost Driver Cost-Allocation Rate Materials receiving Number of parts $2.00 per part Production setup Number of setups $500.00 per setup Quality inspection Inspection time $90 per hour A production run for the basic model is 250 units, for the advanced model, 100 units. Each unit of product consumes the following activities: Number of Parts Number of Setups Inspection Time Basic Gizmo 10 1 setup 10 minutes per production run Advanced Gizmo 15 1 setup 20 minutes per production run Direct costs for the two products are as follows: Direct Materials Direct Labor Basic Gizmo $50.00 $ 75.00 Advanced Gizmo $95.00 $125.00 The amount of overhead allocated to one unit of the basic model would be a. $592. b. $37. c. $162. d. $65.

b. $37.

Sebastian Company, which manufactures electrical switches, uses a standard cost system and carries all inventories at standard. The standard manufacturing overhead costs per switch are based on direct labor hours and are shown below: Variable overhead (5 hours @ $12 per direct manufacturing labor hour) $ 60 Fixed overhead (5 hours @ $15* per direct manufacturing labor hour) 75 Total overhead per switch $135 *Based on capacity of 200,000 direct manufacturing labor hours per month. The following information is available for the month of December: 46,000 switches were produced although 40,000 switches were scheduled to be produced. 225,000 direct manufacturing labor hours were worked at a total cost of $5,625,000. Variable manufacturing overhead costs were $2,750,000. Fixed manufacturing overhead costs were $3,050,000. Under the 2-variance method, the flexible-budget variance for December was a. $10,000 F. b. $40,000 U. c. $50,000 U. d.$100,000 U.

b. $40,000 U.

Tory Company derived the following cost relationship from a regression analysis of its monthly manufacturing overhead cost. y = $80,000 + $12X where: y = monthly manufacturing overhead cost X = machine-hours The standard error of estimate of the regression is $6,000. The standard time required to manufacture one six-unit case of Tory's single product is four machine-hours. Tory applies manufacturing overhead to production on the basis of machine-hours, and its normal annual production is 50,000 cases. [CMA Adapted] Tory's estimated variable manufacturing overhead cost for a month in which scheduled production is 10,000 cases would be a. $80,000. b. $480,000. c. $160,000. d. $320,000.

b. $480,000.

Top That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2009 follow: Work-in-process, January 31—50,000 units 100% complete for direct materials; 40% completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050 Units started during February, 225,000 Units completed during February 200,000 Work-in-process, February 28 75,000 units 100% complete for direct materials; 20% completed for conversion costs Direct materials added during February [actual costs] $342,000 Conversion costs added during February [actual costs] $352,950 If Top That uses the first-in, first-out (FIFO) method to account for inventories, the equivalent units of work for the month of February are Direct Materials Conversion Costs a. 225,000 225,000 b. 225,000 195,000 c. 275,000 200,000 d. 200,000 195,000

b. 225,000 195,000

Tee Times, Inc. produces and sells the finest quality golf clubs in all of Clay County. The company expects the following revenues and costs in 2004 for its Elite Quality golf club sets: Revenues (400 sets sold @ $600 per set) $240,000 Variable costs 160,000 Fixed costs 50,000 How many sets of clubs must be sold for Tee Times, Inc. to reach their breakeven point? a. 400 b. 250 c. 200 d. 150

b. 250

In selecting a cost-allocation base for variable overhead, what criteria for the base is preferred? a. Ease of acquiring reliable information for accurate allocations b. A cause-and-effect relationship between the cost and the activity level c. A single base that will simplify the allocation process d. One that has been used in the past

b. A cause-and-effect relationship between the cost and the activity level

Which of the following is not a major benefit of budgets? a. Compels planning b. Eliminates innovation c. Provides performance criteria d. Promotes coordination and communication

b. Eliminates innovation

Which of the following does not pertain to financial planning models in software form? a. Reduces computational burden and time required to prepare budgets b. Eliminates need to update budgets as uncertainty resolved c. Assists managers with sensitivity analysis d. Performs calculations that are mathematical representations of relationships in master budget

b. Eliminates need to update budgets as uncertainty resolved

Which of the following is an example of a nonmanufacturing cost that may be analyzed using variances? a. Factory rent b. Product distribution costs c. Indirect labor d.Factory supplies

b. Product distribution costs

Which of the following is not an advantage for using standard costs for variance analysis? a. Standards simplify product costing. b. Standards are developed using past costs and are available at a relatively low cost. c. Standards are usually expressed on a per-unit basis. d. Standards can take into account expected changes planned to occur in the budgeted period.

b. Standards are developed using past costs and are available at a relatively low cost.

Which of the following is not a reason for the performance evaluation model to differ from the decision model? a. The use of different time frames: one being an annual basis, the other a period of several years. b. The accounting systems enable each decision to be tracked separately. c. The accrual accounting method incorporates irrelevant costs. d. Top management is rarely aware of particular desirable alternatives that were not chosen by subordinate managers.

b. The accounting systems enable each decision to be tracked separately.

Which of the following statements is more representative of activity-based costing in comparison to a department costing system? a. The use of multiple cost-allocation bases b. The use of indirect-cost rates for significant resource use c. The use of activities having a cause-and-effect relationship d. The use of multiple cost pools

b. The use of indirect-cost rates for significant resource use

What is always the question to ask to determine if revenues or costs are relevant? a. What is the time frame for achieving results? b. What difference will a particular action make? c. Who will be responsible? d. How much will it cost?

b. What difference will a particular action make?

[CPA Adapted] For purposes of allocating joint costs to joint products, the sales value at splitoff method could be used in which of the following situations? No costs Cost beyond beyond splitoff splitoff a. Yes No b. Yes Yes c. No Yes d.NoNo

b. Yes Yes

[CPA Adapted] In accounting for byproducts, the value of the byproduct may be recognized at the time of Production Sale a. Yes No b. Yes Yes c. No No d.NoYes

b. Yes Yes

[CMA Adapted] Flexible budgets a. accommodate changes in the inflation rate. b. accommodate changes in activity levels. c. are used to evaluate capacity utilization. d. are static budgets that have been revised for changes in price(s).

b. accommodate changes in activity levels.

Products G and H are joint products developed from the same process with each being processed further. Joint costs are incurred until splitoff, the separable costs are incurred in further refining each product. Sales values of G and H at splitoff are used to allocate joint costs. If the sales value of G at splitoff increases and all other costs and selling prices remain unchanged, joint costs allocated to: G H a. increases increases b. increases decreases c. decreases decreases d. decreases increases

b. increases decreases

Budgetary slack a. is going to be included in budget estimates, so it should just be ignored. b. provides managers with a hedge against unexpected circumstances. c. should be totally eliminated from the budget. d. is not found in governmental budgets.

b. provides managers with a hedge against unexpected circumstances.

A company may experience the downward demand spiral when a. the use of theoretical capacity as a denominator level has contributed to budgets that project sales to be higher than actually attainable. b. spreading capacity costs over a small number of units and setting selling prices even higher to recover those costs. c. engaged in a cyclical business and after experiencing an upturn. d. the production-volume variance is unfavorable each time period during a year.

b. spreading capacity costs over a small number of units and setting selling prices even higher to recover those costs.

What is the total fixed cost of the shipping department of Elaine Co. if it has the following information for 2011? Salaries $800,000 75% of employees on guaranteed contracts Packaging $400,000 depending on size of item(s) shipped Postage $500,000 depending on weight of item(s) shipped Rent of warehouse space $250,000 annual lease a. $850,000 b. $900,000 c. $1,050,000 d. $1,950,000

c. $1,050,000

Brant Corporation manufactures two products out of a joint process—Scout and Andro. The joint (common) costs incurred are $400,000 for a standard production run that generates 70,000 pounds of Scout and 30,000 pounds of Andro. Scout sells for $9.00 per pound whereas Andro sells for $7.00 per pound. [CMA Adapted] If additional processing costs beyond the splitoff point are $1.00 per pound for Scout and $2.333 per pound for Andro, the amount of joint cost of each production run allocated to Andro on a physical-quantity basis is a. $300,000. b. $280,000. c. $120,000. d.$100,000.

c. $120,000.

Which of the following should not be considered for every option in the decision process? a. Relevant revenues b. Relevant costs c. Historical costs d. Opportunity costs

c. Historical costs

Brant Corporation manufactures two products out of a joint process—Scout and Andro. The joint (common) costs incurred are $400,000 for a standard production run that generates 70,000 pounds of Scout and 30,000 pounds of Andro. Scout sells for $9.00 per pound whereas Andro sells for $7.00 per pound. Assume the same cost information as in question 4. The amount of joint cost of each production run allocated to Scout using the constant gross-margin percentage NRV method is a. $224,910. b. $260,120. c. $335,090. d. $405,090.

c. $335,090.

Information pertaining to Brenton Corporation's sales revenue is presented in the following table. February March April Cash sales $160,000 $150,000 $120,000 Credit sales 300,000 400,000 280,000 Total sales $460,000 $550,000 $400,000 Management estimates that 5% of credit sales are not collectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Cost of purchases of inventory each month is 70% of the next month's projected total sales. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase. [CMA Adapted] Brenton's budgeted total cash receipts in April are a. $448,000. b. $437,000. c. $431,600. d. $328,000.

c. $431,600.

Alvin Inc. planned and actually manufactured 200,000 units of its single product in 2008, its first year of operations. Variable manufacturing costs were $30 per unit of product. Planned and actual fixed manufacturing costs were $600,000, and marketing and administrative costs totaled $400,000 in 2004. Alvin sold 120,000 units of product in 2008 at a selling price of $40 per unit. [CMA Adapted] Alvin's 2008 operating income using variable costing is [CMA Adapted] Alvin's 2008 operating income using absorption costing is a. $840,000. b. $800,000. c. $440,000. d. $200,000.

c. $440,000.

Information on Pruitt Company's direct-material costs for the month of July 2005 was as follows: Actual quantity purchased 30,000 units Actual unit purchase price $2.75 Materials purchase-price variance —unfavorable (based on purchases) $1,500 Standard quantity allowed for actual production 24,000 units Actual quantity used 22,000 units [CPA Adapted] For July 2005 there was a favorable direct-materials efficiency variance of a. $7,950. b. $5,500. c. $5,400. d. $5,600.

c. $5,400.

Sebastian Company, which manufactures electrical switches, uses a standard cost system and carries all inventories at standard. The standard manufacturing overhead costs per switch are based on direct labor hours and are shown below: Variable overhead (5 hours @ $12 per direct manufacturing labor hour) $ 60 Fixed overhead (5 hours @ $15* per direct manufacturing labor hour) 75 Total overhead per switch $135 *Based on capacity of 200,000 direct manufacturing labor hours per month. The following information is available for the month of December: 46,000 switches were produced although 40,000 switches were scheduled to be produced. 225,000 direct manufacturing labor hours were worked at a total cost of $5,625,000. Variable manufacturing overhead costs were $2,750,000. Fixed manufacturing overhead costs were $3,050,000. [CMA Adapted] The fixed manufacturing overhead spending variance for December was a. $450,000 F. b. $400,000 F. c. $50,000 U. d. $775,000 F.

c. $50,000 U.

The following information is available for the Gabriel Products Company for the month of July: Static Budget Actual Units 5,000 5,100 Sales revenue $60,000 $58,650 Variable manufacturing costs $15,000 $16,320 Fixed manufacturing costs $18,000 $17,000 Variable marketing and administrative expense $10,000 $10,500 Fixed marketing and administrative expense $12,000 $11,000 The total sales-volume variance for operating income for the month of July would be a. $2,550 unfavorable. b. $1,350 unfavorable. c. $700 favorable. d. $100 favorable.

c. $700 favorable.

[CPA Adapted] On December 31, 2016, Brown Co. had a machine with an original cost of $90,000, accumulated depreciation of $75,000, and an estimated salvage value of zero. On December 31, 2016, Brown was considering the purchase of a new machine having a five-year life, costing $150,000, and having an estimated salvage value of $30,000 at the end of five years. In its decision concerning the possible purchase of the machine, how much should Brown consider as sunk cost at December 31, 2016? a. $150,000 b. $120,000 c. $90,000 d.$15,000

c. $90,000

Hester Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1, 2004 through June 30, 2005. July 1, 2004 June 30, 2005 Raw material1 40,000 10,000 Work-in-process 8,000 8,000 Finished goods 30,000 5,000 1 Three (3) units of raw material are needed to produce each unit of finished product. CMA Adapted] If 450,000 finished units were to be manufactured during the 2004-2005 fiscal year by Hester Company, the units of raw material needed to be purchased would be a. 1,350,000 units. b. 1,360,000 units. c. 1,320,000 units. d. 1,330,000 units.

c. 1,320,000 units.

Top That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2009 follow: Work-in-process, January 31—50,000 units 100% complete for direct materials; 40% completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050 Units started during February, 225,000 Units completed during February 200,000 Work-in-process, February 28 75,000 units 100% complete for direct materials; 20% completed for conversion costs Direct materials added during February [actual costs] $342,000 Conversion costs added during February [actual costs] $352,950 Assuming Top That uses the weighted-average method to account for inventories, the equivalent units of work for the month of February are Direct Materials Conversion Costs a. 225,000 225,000 b. 200,000 200,000 c. 275,000 215,000 d. 225,000 200,000

c. 275,000 215,000

Which of the following statements is true about overhead cost variance analysis using activity-based costing? a. Overhead cost variances are calculated only for output-unit level costs. b. Overhead cost variances are calculated only for variable manufacturing overhead costs. c. A 4-variance analysis can be conducted. d. Activity-based costing uses input measures for all activities, resulting in the inability to do flexible budgets needed for variance analysis.

c. A 4-variance analysis can be conducted.

Evaluating customer reaction of the tradeoff of giving up some features of a product for a lower price would best fit which category of management decisions under activity-based management? a. Pricing and product-mix decisions b. Cost reduction decisions c. Design decisions d.Discretionary decisions

c. Design decisions

Nicholas, Inc. has provided the following unit data for review: Simple Product Advanced Product Selling price $22.75 $55.00 Variable cost 10.00 34.50 Pounds of scarce raw material per unit 3 5 Which product, Simple or Advanced, is most profitable for Nicholas, Inc. to manufacture? a. Both in ratio of 3:5 b Both in ratio of 5:8 c. Simple d.Advanced

c. Simple

The absolute minimum absorption-inventory cost that would be reported under the best conceivable operating conditions is a description of which type of denominator-level concept cost? a. Master-budget utilization b. Practical capacity c. Theoretical capacity d. Normal utilization

c. Theoretical capacity

[CPA Adapted] Tanner Company manufactures products Katran and Klare from a joint process. Product Katran has been allocated $7,500 of total joint costs of $30,000 for the 1,500 units produced. Katran can be sold at the splitoff point for $4 per unit, or it can be processed further with additional costs of $2,000 and sold for $7 per unit. If Katran is processed further and sold, the result would be a. a breakeven situation. b. an overall loss of $1,500. c. a gain of $2,500 from further processing. d. a gain of $1,000 from further processing.

c. a gain of $2,500 from further processing.

The major cost management concept used in Kaizen budgeting is that of a. eliminating inventories of every type but materials. b. refinements in the indirect-cost categories for costing systems. c. continuous improvement. d. sensitivity analysis using computer-based financial planning models.

c. continuous improvement.

A significant limitation of activity-based costing is the a. attention given to indirect cost allocation. b. many necessary calculations. c. operations staff's attitude toward the accounting staff. d. use it makes of technology.

c. operations staff's attitude toward the accounting staff.

Advertising of a specific product is an example of a. unit-level costs. b. batch-level costs. c. product-sustaining costs. d. facility-sustaining costs.

c. product-sustaining costs.

The main difference between variable costing and absorption costing is a. the treatment of nonmanufacturing costs. b. the accounting for variable manufacturing costs. c. the accounting for fixed manufacturing costs. d. their value for decision makers.

c. the accounting for fixed manufacturing costs.

In refining a cost system a. total direct costs are unchanged because they can be traced in an economically feasible way to the product and traced costs are more accurate. b. the costs are grouped in homogeneous pools of the same or similar amounts. c. the criterion of cause-and-effect is used to relate indirect costs to a factor that systematically links to a cost object. d. the organization looks for cost-allocation bases that will provide a uniform spreading of indirect costs to each product.

c. the criterion of cause-and-effect is used to relate indirect costs to a factor that systematically links to a cost object.

Top That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2009 follow: Work-in-process, January 31—50,000 units 100% complete for direct materials; 40% completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050 Units started during February, 225,000 Units completed during February 200,000 Work-in-process, February 28 75,000 units 100% complete for direct materials; 20% completed for conversion costs Direct materials added during February [actual costs] $342,000 Conversion costs added during February [actual costs] $352,950 If Top That uses the FIFO method to account for inventories, the costs per equivalent unit for February are Direct Materials Conversion Costs a. $1.50 $1.76 b. $1.83 $1.72 c. $1.71 $1.81 d. $1.52 $1.81

d. $1.52 $1.81

Brant Corporation manufactures two products out of a joint process—Scout and Andro. The joint (common) costs incurred are $400,000 for a standard production run that generates 70,000 pounds of Scout and 30,000 pounds of Andro. Scout sells for $9.00 per pound whereas Andro sells for $7.00 per pound. [CMA Adapted] If there are no additional processing costs incurred after the splitoff point, the amount of joint cost of each production run allocated to Andro on a sales value at splitoff basis is a. $300,000. b. $225,000. c. $175,000. d. $100,000.

d. $100,000.

Top That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2009 follow: Work-in-process, January 31—50,000 units 100% complete for direct materials; 40% completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050 Units started during February, 225,000 Units completed during February 200,000 Work-in-process, February 28 75,000 units 100% complete for direct materials; 20% completed for conversion costs Direct materials added during February [actual costs] $342,000 Conversion costs added during February [actual costs] $352,950 Assuming Top That uses the weighted-average method to account for inventories, the assignment of costs to work-in-process at the end of February is a. $300,000. b. $266,250. c $166,525. d. $139,500.

d. $139,500.

Information for Garner Company's direct-labor costs for the month of September 2005 was as follows: Actual direct-labor hours 34,500 hours Standard direct-labor hours 35,000 hours Total direct-labor payroll $241,500 Direct-labor efficiency variance—favorable $3,200 [CPA Adapted] What is Garner's direct-labor price (or rate) variance? a. $21,000 favorable b. $21,000 unfavorable c. $17,250 unfavorable d. $20,700 unfavorable

d. $20,700 unfavorable

Alvin Inc. planned and actually manufactured 200,000 units of its single product in 2008, its first year of operations. Variable manufacturing costs were $30 per unit of product. Planned and actual fixed manufacturing costs were $600,000, and marketing and administrative costs totaled $400,000 in 2004. Alvin sold 120,000 units of product in 2008 at a selling price of $40 per unit. [CMA Adapted] Alvin's 2008 operating income using variable costing is a. $800,000. b. $600,000. c. $440,000. d. $200,000.

d. $200,000.

Jackson Enterprises manufactures two products—a basic gizmo and an advanced model gizmo. The company is using an activity-based costing system. They have identified three activities for allocation of indirect costs. Activity Cost Driver Cost-Allocation Rate Materials receiving Number of parts $2.00 per part Production setup Number of setups $500.00 per setup Quality inspection Inspection time $90 per hour A production run for the basic model is 250 units, for the advanced model, 100 units. Each unit of product consumes the following activities: Number of Parts Number of Setups Inspection Time Basic Gizmo 10 1 setup 10 minutes per production run Advanced Gizmo 15 1 setup 20 minutes per production run Direct costs for the two products are as follows: Direct Materials Direct Labor Basic Gizmo $50.00 $ 75.00 Advanced Gizmo $95.00 $125.00 The total cost of an advanced model would be a. $162. b. $65. c. $200. d. $285.

d. $285.

Tee Times, Inc. produces and sells the finest quality golf clubs in all of Clay County. The company expects the following revenues and costs in 2004 for its Elite Quality golf club sets: Revenues (400 sets sold @ $600 per set) $240,000 Variable costs 160,000 Fixed costs 50,000 What amount of sales must Tee Times, Inc. have to earn a target net income of $63,000 if they have a tax rate of 30%? a. $489,000 b. $429,000 c. $420,000 d. $300,000

d. $300,000

Sebastian Company, which manufactures electrical switches, uses a standard cost system and carries all inventories at standard. The standard manufacturing overhead costs per switch are based on direct labor hours and are shown below: Variable overhead (5 hours @ $12 per direct manufacturing labor hour) $ 60 Fixed overhead (5 hours @ $15* per direct manufacturing labor hour) 75 Total overhead per switch $135 *Based on capacity of 200,000 direct manufacturing labor hours per month. The following information is available for the month of December: 46,000 switches were produced although 40,000 switches were scheduled to be produced. 225,000 direct manufacturing labor hours were worked at a total cost of $5,625,000. Variable manufacturing overhead costs were $2,750,000. Fixed manufacturing overhead costs were $3,050,000. [CMA Adapted] The variable manufacturing overhead efficiency variance for December was a. $50,000 U. b. $350,000 U. c. $10,000 F. d. $60,000 F.

d. $60,000 F.

Top That manufactures baseball-style hats. Material is introduced at the beginning of the process in the Cutting Department. Conversion costs are incurred (and allocated) uniformly throughout the process. As the cutting of material is completed, the pieces are immediately transferred to the Sewing Department. Data for the Cutting Department for the month of February 2009 follow: Work-in-process, January 31—50,000 units 100% complete for direct materials; 40% completed for conversion costs actual costs of direct materials, $70,500; actual costs of conversion, $34,050 Units started during February, 225,000 Units completed during February 200,000 Work-in-process, February 28 75,000 units 100% complete for direct materials; 20% completed for conversion costs Direct materials added during February [actual costs] $342,000 Conversion costs added during February [actual costs] $352,950 In the Sewing Department, additional direct materials are added to the product at the end of production. Without prejudice to your answer for questions 1 through 6, assume that 200,000 units were transferred from the Cutting Department and that the weighted-average method is used. Data for February follow: Work-in-process, January 31—70,000 units (30% complete as to conversion) Units completed during February—240,000 units Work-in-process, February 28—30,000 units (80% complete as to conversion) For the Sewing Department, the equivalent units of work done in February is Transferred In Direct Materials Conversion Costs a. 200,000 200,000 200,000 b. 200,000 170,000 194,000 c. 240,000 240,000 245,000 d. 270,000 240,000 264,000

d. 270,000 240,000 264,000

Hester Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1, 2004 through June 30, 2005. July 1, 2004 June 30, 2005 Raw material1 40,000 10,000 Work-in-process 8,000 8,000 Finished goods 30,000 5,000 1 Three (3) units of raw material are needed to produce each unit of finished product. 4. [CMA Adapted] If Hester Company plans to sell 500,000 units during the 2004-2005 fiscal year, the number of units it would have to manufacture during the year would be a. 505,000 units. b. 500,000 units. c. 480,000 units. d. 475,000 units.

d. 475,000 units.

Valley Company sells two products. Product M sells for $12 and has variable costs per unit of $7. Product Q's selling price and variable costs are $15 and $10, respectively. If fixed costs are $60,000 and Valley sells twice as many units of Product M as Product Q, what is the BEP in units for Product M? a. 4,000 b. 6,000 c. 12,000 d. 8,000

d. 8,000

Which of the following statements does not describe responsibility accounting? a. It measures the plans and actions of each responsibility center. b. It budgets to emphasize that for which each responsibility center is accountable. c. It calculates variances between budgeted and actual accountability for each responsibility center. d. It identifies managers at fault for operating problems by reports for each responsibility center.

d. It identifies managers at fault for operating problems by reports for each responsibility center.

Which of the following pertains primarily to the planning of fixed overhead costs? a. A standard rate per output unit is developed. b. Only essential activities are to be undertaken. c. Activities are to be undertaken in the most efficient method. d. Key decisions are made at the start of the budget period determining the level of costs.

d. Key decisions are made at the start of the budget period determining the level of costs.

Which of the following is not a correct use of the term opportunity cost? a. Opportunity costs are considered period costs rather than inventoriable costs for accounting purposes. b. Opportunity costs must be considered by managers when making decisions. c. Opportunity cost plus the incremental future revenues and costs equal the relevant revenues and costs of any alternative when capacity is constrained. d. The opportunity cost of holding inventory is the income forgone by tying up money in inventory and not investing it elsewhere.

d. The opportunity cost of holding inventory is the income forgone by tying up money in inventory and not investing it elsewhere.

RCG Services is investigating its profitability relationship with each of its customers. What is the one question RCG should ask in deciding whether to keep or drop a particular customer? a. Will the customer meet a specific designated gross margin percentage? b. Will the customer be willing to pay a higher price to insure RCG's profitability? c. Will enough customers be found to replace any customers dropped for lack of profitability? d. Will expected total corporate office costs decrease if a decision is made to drop the customer?

d. Will expected total corporate office costs decrease if a decision is made to drop the customer?

The manner in which a company deals with end-of-period variances will determine the effect production-volume variances have on the company's end-of-period operating income. When the chosen capacity level exceeds the actual production level, which approach to end-of-period variances results in an unfavorable production-volume variance affect on that period's operating income? a. Proration approach b. Adjusted allocation-rate approach c. Theoretical approach d. Write-off to cost-of-goods-sold approach

d. Write-off to cost-of-goods-sold approach

[CPA Adapted] Mohler Corporation manufactures a product that yields the byproduct Jep. The only costs associated with Jep are selling costs of $0.10 for each unit sold. Mohler accounts for sales of Jep by deducting Jep's separable costs from Jep's sales and then deducting this net amount from the major product's cost of goods sold. Jep's sales were 200,000 units at $1.00 each. If Mohler changes its method of accounting for Jep's sales by showing the net amount as additional sales revenue, the Mohler's gross margin would a. increase by $180,000. b. increase by $200,000. c. increase by $220,000. d. be unaffected.

d. be unaffected.

[CMA Adapted] Troy Instruments uses ten units of Part Number S1798 each month in the production of scientific equipment. The unit cost to manufacturing one unit of S1798 is presented below. Direct materials $ 4,000 Materials handling (10% of direct materials cost) 400 Direct manufacturing labor 6,000 Indirect manufacturing (200% of direct labor) 12,000 Total manufacturing cost $22,400 Materials handling represents the direct variable costs of the Receiving Department that are applied to all direct materials and purchased components on the basis of their cost. This is a separate charge in addition to indirect manufacturing cost. Troy's annual indirect manufacturing cost budget is one-fourth variable and three-fourths fixed. Duncan Supply, one of Troy's reliable vendors, has offered to supply Part Number S1798 at a unit price of $17,000. If Troy purchases the S1798 units from Duncan, the capacity Troy used to manufacture these parts would be idle. Should Troy decide to purchase the parts from Duncan, the unit cost of S1798 would a. decrease by $3,700. b. decrease by $5,600. c. increase by $3,600. d. increase by $5,300.

d. increase by $5,300.

The concept of outsourcing services to countries with lower labor costs is known as a. opportunity cost. b. offshoring. c. insourcing. d. international outsourcing.

d. international outsourcing.

Controllability a. is always clear cut as to who has responsibility for a cost. b. is another term for responsibility. c. is the responsibility of the corporate controller. d. is the degree of influence a specific manager has over costs, revenues, and other items.

d. is the degree of influence a specific manager has over costs, revenues, and other items.

Benchmarking is a. relatively easy to do with the amount of available financial information about companies. b. best done with the best in their field regardless of type of company. c. simply reporting the magnitude of differences in costs or revenues across companies. d. making comparisons to direct attention to why differences in costs exist across companies.

d. making comparisons to direct attention to why differences in costs exist across companies.

Budgeting is the common accounting tool companies' use for planning and controlling. Budgets a. provide a measure of planned financial results. b. are prepared independent of the company's long-term strategies. c. do not usually reflect actual results, so they are a useless exercise. d. serve as the financial expression of management's plans for the upcoming period.

d. serve as the financial expression of management's plans for the upcoming period.

The proponents of throughput costing a. maintain that variable costing undervalues inventories. b. maintain that it provides more incentive to produce for inventory than do either variable or absorption costing. c. argue that only direct materials and direct labor are "truly variable" and all indirect manufacturing costs be written off in the period in which they are incurred. d. treat all costs except those related to variable direct materials as costs of the period in which they are incurred.

d. treat all costs except those related to variable direct materials as costs of the period in which they are incurred.

Tory Company derived the following cost relationship from a regression analysis of its monthly manufacturing overhead cost. y = $80,000 + $12X where: y = monthly manufacturing overhead cost X = machine-hours The standard error of estimate of the regression is $6,000. The standard time required to manufacture one six-unit case of Tory's single product is four machine-hours. Tory applies manufacturing overhead to production on the basis of machine-hours, and its normal annual production is 50,000 cases. [CMA Adapted] Tory's predetermined fixed manufacturing overhead rate would be a. $4.80/MH. b. $4.00/MH. c. $3.20/MH. d. $1.60/MH.

d.$1.60/MH.

Sebastian Company, which manufactures electrical switches, uses a standard cost system and carries all inventories at standard. The standard manufacturing overhead costs per switch are based on direct labor hours and are shown below: Variable overhead (5 hours @ $12 per direct manufacturing labor hour) $ 60 Fixed overhead (5 hours @ $15* per direct manufacturing labor hour) 75 Total overhead per switch $135 *Based on capacity of 200,000 direct manufacturing labor hours per month. The following information is available for the month of December: 46,000 switches were produced although 40,000 switches were scheduled to be produced. 225,000 direct manufacturing labor hours were worked at a total cost of $5,625,000. Variable manufacturing overhead costs were $2,750,000. Fixed manufacturing overhead costs were $3,050,000. Under the 3-variance method, the spending variance for December was a. $10,000 F. b. $40,000 U. c. $50,000 U. d.$100,000 U.

d.$100,000 U.