COST FINAL EXAM

by-product

A secondary product recovered in the course of manufacturing a primary product during a joint process is called a: a. joint product b. by-product c. main product d. both "main product" and "by-product"

Investments

A manager of a profit center does not control: a. Profits b. Investments c. Costs d. Revenues

cost center

A manufacturing division of a company would most likely be evaluated as a(n) a. asset center. b. cost center. c. revenue center. d. investment center.

number of employees

A possible causal factor to use when allocating cafeteria costs would be a. number of square feet. b. appraised value of square footage. c. number of employees. d. number of direct labor hours.

$480 (F)

Bodacious Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct labor for the 100 units of Product AA are as follows: Materials: Standard Actual Standard: 200 pounds at $3.00 per pound $600 Actual: 220 pounds at $2.85 per pound $627 Direct labor: Standard: 400 hours at $15.00 per hour $6,000 Actual: 368 hours at $16.50 per hour $6,072 What is the labor efficiency variance for Bodacious Corporation? a. $552 (U) b. $480 (U) c. $552 (F) d. $480 (F)

All of these choices are correct.

Goal congruence can be defined as a. managers operating the business in the best interest of the shareholders. b. tying management rewards to shareholder results. c. an incentive plan arranged so the managers' goals are aligned with the shareholders' goals. d. All of these choices are correct.

EVA = After-tax operating income - (Weighted average cost of capital × Total capital employed)

Economic value added is calculated by which of the following formulas? a. EVA = After-tax operating income + (Weighted average cost of capital × Total capital employed) b. EVA = After-tax operating income - (Weighted average cost of capital × Total capital employed) c. EVA = Total capital employed - (Weighted average cost of capital × After-tax operating income) d. EVA = After-tax operating income × Weighted average cost of capital

machining.

Examples of support departments include all of the following EXCEPT a. data processing. b. machining. c. maintenance. d. personnel.

the difference between the actual fixed overhead and the budgeted fixed overhead.

Fixed overhead volume variance is: a. the difference between budgeted fixed overhead and actual direct labor hours used. b. the difference between budgeted fixed overhead and applied fixed overhead. c. the difference between actual fixed overhead and standard direct labor hours that should have been used. d. the difference between the actual fixed overhead and the budgeted fixed overhead.

UnfavorableUnfavorable

If the actual labor rate exceeds the standard labor rate and the actual labor hours exceed the number of hours allowed, the labor rate variance and labor efficiency variance will be Labor Rate Variance Labor Efficiency Variance a. FavorableFavorable b. FavorableUnfavorable c. UnfavorableFavorable d. UnfavorableUnfavorable

$1,000 unfavorable

If the standard quantity (SQ), actual quantity (AQ), standard price (SP), and actual price (AP) are 350 units, 400 units, $12, and $13 respectively, then the total budget variance is _____. a. $1,000 unfavorable b. $250 favorable c. $250 unfavorable d. $1,000 favorable

allocated arbitrarily

Joint costs are a. separable. b. allocated arbitrarily. c. allocated on the basis of cause and effect relationships. d. All of these choices are correct

actual and standard unit prices of an input multiplied by the actual quantity of inputs.

Price/rate variances focus on the differences between a. actual and standard inputs multiplied by standard prices. b. actual and standard unit prices of an input multiplied by the budgeted quantity of inputs. c. actual and standard inputs multiplied by actual prices. d. actual and standard unit prices of an input multiplied by the actual quantity of inputs.

joint products

Products with substantial value which are produced simultaneously by the same process up to a split-off point are called: a. by-products b. joint products c. minor products d. Both "joint products" and "minor products"

measures the results of each responsibility center and compares those results with some measure of expected or budgeted outcome.

Responsibility accounting is defined as a system that a. measures the results of a manager responsible for revenues and costs. b. measures actual results against a flexible budget. c. measures the results of each responsibility center and compares those results with some measure of expected or budgeted outcome. d. defines responsibility by function only.

establishes price and quantity standards for inputs.

Standard costing a. provides journal entry support. b. is not used in unit costing. c. establishes price and quantity standards for inputs. d. None of these choices are correct.

provide essential services to the producing departments.

Support departments a. provide essential services to the producing departments. b. are responsible for manufacturing the products sold to customers. c. work directly on the products of the firm. d. provide services directly to customers.

EVA

The after-tax operating profit minus the total annual cost of capital equals the: a. Residual income b. Net income c. ROI d. EVA

joint costs

The cost of crude oil used in producing gasoline products is an example of a. a by-product. b. joint products. c. joint costs. d. common cost allocation.

decisions regarding costs.

The manager of a cost center is responsible for a. decisions regarding revenues. b. decisions to invest in assets. c. decisions regarding costs. d. both "decisions regarding costs" and "decisions regarding revenues".

both "delivering a quality product or service at reasonable but minimal cost" and "decisions regarding revenue generation".

The manager of a profit center is responsible for a. delivering a quality product or service at reasonable but minimal cost. b. decisions to invest in capital equipment. c. decisions regarding revenue generation. d. both "delivering a quality product or service at reasonable but minimal cost" and "decisions regarding revenue generation".

All of these choices are correct.

The manager of an investment center is responsible for a. decisions regarding costs. b. decisions to invest in assets. c. decisions regarding revenues. d. All of these choices are correct.

operating income divided by average operating assets.

The return on investment is computed as a. operating income divided by average operating assets. b. operating asset turnover divided by the operating income margin. c. operating income divided by sales. d. sales divided by average operating assets.

the point at which joint products become separate and identifiable.

The split-off point can best be defined as a. the point at which a secondary product is recovered in the course of manufacturing a primary product. b. the point at which joint products become separate and identifiable. c. the point at which you can get more of one product and less of another product. d. the point in the production process where no further processing is needed.

The maximum transfer price

The transfer price that would leave the buying division no worse off if an input is purchased from an internal division is(are) called: a. The minimum transfer price b. The negotiated transfer price c. The maximum transfer price d. Both "The maximum transfer price" and "The negotiated transfer price"

The minimum transfer price

The transfer price that would leave the selling division no worse off if the good is sold to an internal division is(are) called: a. The negotiated transfer price b. The minimum transfer price c. The maximum transfer price d. Both "The maximum transfer price" and "The minimum transfer price"

actual quantity used and standard quantity allowed for actual production.

The usage variances focus on the difference between a. actual quantity used and standard quantity allowed for budgeted production. b. actual costs of inputs and standard costs of inputs. c. actual quantity used and standard quantity allowed for actual production. d. both "actual quantity used and standard quantity allowed for actual production" and "actual costs of inputs and standard costs of inputs".

All of these choices are correct.

Using more highly skilled direct laborers might affect which of the following variances? a. variable manufacturing overhead efficiency variance b. direct labor efficiency variance c. direct materials usage variance d. All of these choices are correct.

$60 favorable

Vin Corporation has the following data related to 100 units of final product: Materials: Standard: 300 pounds at $3.00 per pound Actual: 280 pounds at $2.75 per pound What is the material usage variance for Vin Corporation? a. $60 favorable b. $60 unfavorable c. $55 unfavorable d. $55 favorable

market price

When there is an outside market for an intermediate product that is perfectly competitive, the most equitable method of transfer pricing is a. production cost pricing. b. market price. c. cost plus markup pricing. d. variable cost pricing.

sequential method

Which of the following allocation methods assumes "step-down" interdepartmental services? a. sequential method b. direct method c. reciprocal method d. All of these choices are correct.

reciprocal method

Which of the following allocation methods fully recognizes services that support departments provide to each other? a. sequential method b. reciprocal method c. direct method d. All of these choices are correct.

The direct allocation method

Which of the following cost allocation methods allocates support department costs only to the producing departments? a. The reciprocal allocation method b. The direct allocation method c. The step allocation method d. The proportional allocation method

personnel

Which of the following cost categories would most likely use the number of employees or new hires as its activity driver? a. purchasing b. personnel c. accounting d. maintenance

The Automotive Department

Which of the following departments in an organization is a profit center? a. The Accounting Department b. The Administration Department c. The Automotive Department d. The Marketing Department

food products division

Which of the following departments is likely to be an investment center? a. food products division b. accounting department c. personnel department d. machining departmen

sales department

Which of the following departments would NOT be a cost center? a. building and grounds department b. advertising department c. city police department d. sales department

using more highly skilled workers

Which of the following factors would cause an unfavorable labor rate variance? a. using more unskilled workers b. using low-efficiency workers c. using higher quality materials d. using more highly skilled workers

using poorly maintained machinery

Which of the following factors would cause an unfavorable material quantity variance? a. using higher quality materials b. using poorly maintained machinery c. using more highly skilled workers d. receiving discounts for purchasing larger than normal quantities

It encourages managers to focus on the long run rather than the short run.

Which of the following is NOT a disadvantage of the ROI performance measure? a. It encourages managers to focus on the long run rather than the short run. b. It discourages managers from investing in projects that would decrease divisional ROI but increase the profitability of the company as a whole. c. It encourages myopic behavior. d. All of these choices are disadvantages of the ROI measure.

sawdust

Which of the following is a by-product? a. whole milk b. lumber c. sawdust d. fresh fish

They both do not discourage myopic behavior.

Which of the following is a disadvantage of both residual income and ROI? a. They are both absolute measures of return. b. They both do not discourage myopic behavior. c. They are both difficult to calculate. d. All of these choices are disadvantages of both ROI and residual income.

assembly

Which of the following is an example of a producing department in a manufacturing firm? a. Materials storeroom b. Cafeteria c. Assembly d. Maintenance

There is an unfavorable volume variance.

Which of the following is the result of actual production being less than expected production? a. There is an unfavorable volume variance. b. There is an unfavorable spending variance. c. There is a favorable spending variance. d. There is a favorable volume variance.

stock ownership

Which of the following managerial rewards is NOT a short-term reward? a. stock options b. stock ownership c. cash bonuses d. both "stock ownership" and "cash bonuses"

The net realizable value method

Which of the following methods of cost allocation based on market value is used when there is no ready market price available for the individual products at the split-off point? a. The physical units method b. The net realizable value method c. The constant gross margin percentage method d. The sales-value-at-split-off method

investment center

Which of the following responsibility centers would have a manager responsible for revenues, costs, and investments? a. investment center b. cost center c. profit center d. expense center

It should be allocated based on the practical capacity of user departments.

Which of the following statements is true of the allocation of fixed support department costs? a. It should be allocated only to other support departments of a firm. b. It should be allocated based on the practical capacity of user departments. c. It should be allocated based on the direct labor hours used by support departments. d. It should be allocated only to the user departments making maximum use of support departments.

machine hours

Which of the following would be the most appropriate base for allocating the costs of the maintenance department? a. machine hours b. number of employees c. direct labor hours d. square feet