Final

Normal spoilage is spoilage that is NOT considered to be inherent in a production process.

False

One of the steps in planning is evaluating the performance and taking corrective measures.

False

Operating income is sales revenue minus operating expenses.

False

Overhead costs allocated each month are expected to equal actual overhead costs incurred each month.

False

Proration approach restates all amounts in the general and subsidiary ledgers by using actual rather than budgeted cost rates.

False

Serviceminus−sustaining costs are the costs of activities that managers cannot trace to individual services but that support the organization as a whole.

False

Standard costing is a cost system that allocates overhead costs on the basis of overhead cost rates based on actual overhead costs times the standard quantities of the allocation bases allowed for the actual outputs produced.

False

An increase in the tax rate will increase the breakeven point.

False

Aurous Incorporated planned to use $ 45$45 of material per unit but actually used $ 32$32 of material per​ unit, and planned to make 1 comma 5701,570 units but actually made 1 comma 3401,340 units. The flexibleminus−budget variance for materials is​ ________.

$17420 favorable

Black Forrest manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $ $220 per​ table, consisting of 85​% variable costs and 15​% fixed costs. The company has surplus capacity available. It is Back​ Forrest's policy to add a 45​% markup to full costs. Black Forrest is invited to bid on a oneminus−timeminus−only special order to supply 200 rustic tables. What is the lowest price Black Forrest should bid on this special​ order?

$37400

A local accounting firm employs 20 fullminus−time professionals. The budgeted annual compensation per employee is​ $40,500. The average chargeable time is 500 hours per client annually. All professional labor costs are included in a single directminus−cost category and are allocated to jobs on a perminus−hour basis. Other costs are included in a single indirectminus−cost ​pool, allocated according to professional laborminus−hours. Budgeted indirect costs for the year are​ $787,500, and the firm expects to have 90 clients during the coming year. If ten clients are lost and the workforce stays at 20​ employees, then the direct labor cost rate per​ hour:

20.25

Depreciation allocated to a product line is a relevant cost when deciding to discontinue that product.

False

Each cost pool may have multiple cost allocation bases.

False

Equal weight must be given to qualitative factors and quantitative nonfinancial factors while making decisions.

False

Fixed manufacturing overhead is a period cost both under variable costing and under absorption costing.

False

Fixed overhead has no productionminus−volume variance.

False

If the value of a byproduct drops​ significantly, it could also be viewed as a joint product.

False

In job​ costing, only direct costs are used to determine the cost of a job.

False

The technical considerations of budgeting encourage managers and other employees to strive for achieving the goals of the organization.

False

If the contribution margin ratio is​ 0.40, targeted operating income is​ $80,000, and targeted sales volume in dollars is​ $500,000, then the degree of operating leverage is​ ________.

2.5 times

A budget is a qualitative expression of a plan.

False

In variable​ costing, all nonmanufacturing costs are subtracted from contribution margin.

False

Managers can always view a favorable variable overhead spending variance as desirable.

False

Accounting methods for internal reporting purposes are specified by Generally Accepted Accounting Principles​ (GAAP).

False

Verer Custom Carpentry manufactures chairs in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After​ inspection, some units are spoiled due to nondetectible material defects. Spoiled units generally constitute 55​% of the good units. Data provided for March 20X5 are as​ follows: ​WIP, beginning inventory​ 3/1/20X5 32 comma 80032,800 units Direct materials​ (100% complete) Conversion costs ​(8080​% ​complete) Started during March 70 comma 70070,700 units Completed and transferred out 80 comma 50080,500 units ​WIP, ending inventory​ 3/31/20X5 18 comma 20018,200 units Direct materials​ (100% complete) Conversion costs ​(7070​% ​complete) ​Costs: ​WIP, beginning​ inventory: Direct materials $ 70 comma 100$70,100 Conversion costs 40 comma 70040,700 Direct materials added 106 comma 000106,000 Conversion costs added 128 comma 160128,160 What costs are allocated to the ending workminus−inminus−process inventory for direct materials and conversion​ costs, respectively, using the FIFO method of process​ costing? (Round intermediary calculations to the nearest​ cent.)

27300, 22 677

Dynozz Corporation currently produces cardboard boxes in an automated process. Expected production per month is 20 comma 20,000 ​units, direct material costs are $2.50 per​ unit, and manufacturing overhead costs are $ 9 comma $9,000 per month. Manufacturing overhead is all fixed costs. What are the flexible budgets for total costs for 14 comma 14,000 and 20 comma 20,000 ​units, respectively?

44000; 59000

Henry​ Inc., a manufacturing​ firm, is able to produce​ 1,000 pairs of sneakers per​ hour, at maximum efficiency. There are three eightminus−hour shifts each day. Due to unavoidable operating​ interruptions, production averages 800 units per hour. The plant actually operates only 27 days per month. Based on the current​ budget, Henry estimates that it will be able to sell only​ 500,000 units due to the entry of a competitor with aggressive marketing capabilities. But the demand is unlikely to be affected in future and will be around​ 515,000. Assume the month has 30 days. What is the theoretical capacity for the​ month?

720000 units

Pearl Corp. applies manufacturing overhead costs to products at a budgeted indirectminus−cost rate of $ 65$65 per direct manufacturing laborminus−hour. A retail outlet has requested a bid on a special order of a necklace. Estimates for this order​ include: Direct materials of $ 35 comma 000$35,000​; 200200 direct manufacturing laborminus−hours at $ 45$45 per​ hour; and a 5050​% markup rate on total manufacturing costs. The bid price for this special order is​ ________.

85500

Which of the following is true of​ variance?

A variance within an acceptable range is considered to be an ​"inminus−control ​occurrence" and calls for no investigation or action by managers.

Which of the following is the mathematical expression for the budgeted fixed overhead cost per unit of cost allocation​ base?

Budgeted fixed overhead cost per unit of cost allocation base​ = Budgeted total costs in fixed overhead cost pool / Budgeted total quantity of cost allocation base

Abnormal spoilage is spoilage inherent in a particular production process.

False

Which account is debited if materials costing​ $100,000 are​ sold?

Cost of Goods Sold account

​________ is an afterminus−sale support provided to customers.

Customer Service

Which of the following statements is true of joint production process and its​ components?

Decisions relating to the sale or further processing of each identifiable product can be made independently of decisions about the other products beyond the splitoff point.

Which of the following is true of depreciation​ cost?

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

If there was no beginning work in process and no ending work in process under the weightedminus−average process costing​ method, the number of equivalent units for direct​ materials, if direct materials were added at the start of the​ process, would be​ ________.

Equal to the units completed during the period.

A flexibleminus−budget variance pertaining to revenues is often called a salesminus−volume variance.

False

The constant grossminus−margin percentage method differs from marketminus−based jointminus−cost allocation method​ (sales value at splitoff and estimated net realizable​ value) since no account is taken of profits earned before or after the splitoff point when allocating joint costs.

False

The journal entry for transfer from Department B to finished goods​ is: Work in Processlong dash—Department B Finished Goods Control

False

The only allowable method of joint cost allocation is specified by FASB.

False

Using practical capacity is best for evaluating the marketing​ manager's performance for a particular year.

False

Variable costs per unit vary with the level of production or sales volume.

False

When calculating the costs to be transferred using the FIFO​ method, we should not include costs assigned in the previous period to units that were in process at the beginning of the current period but are now included in the units transferred.

False

When large differences exist between practical capacity and masterminus−budget capacity​ utilization, several companies classify the difference as productionminus−volume variance.

False

​Jacob's Manufacturing sales is equal to production.If​ Jacob's Manufacturing presented a Financial Accounting Income Statement emphasizing gross margin showing operating income of​ $180,000, a Contribution Income Statement emphasizing contribution margin would show a different operating income.

False

Multiple cost drivers​ ________.

Have no Unique breakeven pint

Which of the following is true of normal capacity​ utilization?

It can result in settling prices that are not competitive.

A company has a policy​ "investigate all variances exceeding​ $3,000 or​ 15% of the budgeted​ cost." There is a variance of​ $2,000 in repair and maintenance costs of​ $12,000. What does the company do in the given​ situation?

It deserves more attention as it is more than​ 15% of total repair cost.

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

It hides the amount of unused capacity.

Overcosting a particular product may result in​ ________.

Loss of market share

The​ ________ approach carries the underallocated or overallocated amounts to overhead accounts in the following year.

None of these answers are correct.

Which of the following is true about the assumptions underlying basic CVP​ analysis?

Only selling price, variable cost per unit, and total fixed costs are known and constant

Which of the following is a sign that an ABC system may be useful for an​ organization?

Operations staff disagrees with accountants about the costs of manufacturing and marketing products and services.

Answer the following questions using the information​ below: These questions refer to flexibleminus−budget variance formulas with the following descriptions for the​ variables: A​ = Actual; B​ = Budgeted; P​ = Price; Q​ = Quantity. The best label for the formula​ (AP minus− ​BP) AQ is the​ ________.

Price Variance

Which of the following statements is true of main products and​ byproducts?

Product Classifications may change over Time

Gross margin is​ ________.

Sales revenue less cost of goods sold

Which of the following statements is true of performance​ reports?

The performance report shows actual performance as compared to the budget.

Which of the following statements is true in regard to the causeminus−andminus−effect relationship between allocated joint costs and individual​ products?

There is no cause - and - effect relationship

Which of the following is true of CVP​ analysis?

Total revenues and total costs are linear in relation to output units

A direct cost of one cost object can be an indirect cost of another cost object.

True

A fixed cost is fixed only in relation to a given wide range of total activity or volume and only for a given time​ span, usually a particular budget period.

True

A variance within an acceptable range is considered to be an ​"inminus−control ​occurrence" and calls for no investigation or action by managers.

True

Adjusted allocationminus−rate approach restates all amounts in the general and subsidiary ledgers by using actual rather than budgeted cost rates.

True

All costs other than direct materials and direct manufacturing labor are classified as indirect costs.

True

As a company reduces its inventory​ levels, operating income differences between absorption costing and variable costing become immaterial.

True

As product diversity and indirect costs​ increase, it is usually best to switch away from a broad averaging system to an activityminus−based cost system.

True

Control comprises taking actions that implement the planning​ decisions, evaluating past​ performance, and providing feedback and learning to help future decision making.

True

Customer relationship management initiatives use technology to coordinate all customerminus−facing activities​ (such as​ marketing, sales​ calls, distribution, and afterminus−sales ​support) and the design and production activities necessary to get products to customers.

True

Determining the​ "right" level of capacity is one of the most strategic and difficult decisions managers face.

True

In multiproduct situations when sales mix shifts toward the product with the highest contribution​ margin, operating income will be higher.

True

Normal costing is a costing system that traces direct costs to a cost object by using the actual directminus−cost rates times the actual quantities of the directminus−cost inputs.

True

Practical capacity is the level of capacity that reduces theoretical capacity by considering unavoidable operating​ interruptions, such as scheduled maintenance time and shutdowns for holidays.

True

Proration is the spreading of underallocated or overallocated overhead among ending work in​ process, finished​ goods, and costs of goods sold.

True

Qualitative factors are important in the decisionminus−making process even though they cannot be measured numerically.

True

Standard costing is a costing system that allocates overhead costs on the basis of the standard overheadminus−cost rates times the standard quantities of the allocation bases allowed for the actual outputs produced.

True

The design of​ products, services, and processes component of the supply chain refers to the detailed​ planning, engineering, and testing of products and processes.

True

The production method for recognizing byproducts reduces the cost of manufacturing the main or joint products in the income statement.

True

The weightedminus−average method merges unit costs from different accounting​ periods, obscuring periodminus−tominus−period comparisons.

True

There is a tradeoff between the speed of production and the normal spoilage rate.

True

Variance analysis of fixed nonmanufacturing​ costs, such as distribution​ costs, can also be useful when planning for capacity.

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

When a joint production process yields two or more products with high total sales​ values, these products are called joint products.

True

When capacity is​ constrained, the relevant revenues and costs of any alternative equal the incremental future revenues and costs plus the opportunity cost.

True

When production quantity exceeds​ sales, throughput costing results in reporting lower operating income than variable costing.

True

When variances are​ immaterial, which of the following statements is true of the journal entry to writeminus−off the variable overhead variance​ accounts?

Unfavorable efficiency variance will be credited.

Which account would be credited if the following labor wages were incurred in a furniture manufacturing​ company? Assembly workers ​$20,000 Janitors ​$10,000

Wages Payable Control 30000

Variances should be investigated​ ________.

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

Outside the relevant​ range, variable​ costs, such as direct material costs​ ________.

Will not change proportionally with changes in production volumes

Costs of normal spoilage are usually accounted for as​ ________.

a component of the costs of good units manufactured

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

absorption costing

The​ ________ adjusts individual jobminus−cost records to account for underallocated or overallocated overhead.

adjusted allocation - rate

Fixed costs depend on the​ ________.

amount of unchanged costs for a given period of time

Nonfinancial performance measures​ ________.

are usually used in combination with financial measures for control purposes

An unfavorable price variance for direct materials might indicate​ ________.

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

Cost tracing is​ ________.

the assignment of direct costs to the chosen object.

In the service​ sector, to achieve timely reporting on the profitability of an​ engagement, a company will use​ ________.

budgeted rates for some direct costs and indirect costs

Cost allocation is​ ________.

the assignment of indirect costs to the chosen cost object

Cannady produces six products. Under their traditional cost system using one cost​ driver, SR6 costs​ $168.00 per unit. An analysis of the activities and their costs revealed that three cost drivers would be used under the new ABC system. The new cost of SR6 was determined to be​ $178.00 per unit. Given this change in the cost​ ________.

the costing results for SR6 under the new system depend on the adequacy and quality of the estimated cost drivers and costs used by the system

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

competitors taking market share

The constant grossminus−margin percentage NRV method of joint cost allocation​ ________.

computes gross margin before allocating the costs to the products

Operating income reported on the end−of−period financial statements is changed when​ ________ is used to handle the production−volume variance at the end of the accounting period.

the write−off variances to cost of goods sold approach

In CVP​ analysis, focusing on target net income rather than operating income​ ________.

will not change the breakeven point

Which of the following is an irrelevant​ cost?

depreciation

The planned operating income is calculated by​ ________.

dividing net income by 1 - tax rate

Normal spoilage rates are computed by​ ________.

dividing the units of normal spoilage by total good units completed

The degree to which a predetermined objective or target is met is known as​ ________.

effectiveness

In the computation of the cost per equivalent​ unit, the weightedminus−average method of process costing considers all the costs​ ________.

entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period

In a costminus−benefit ​approach, managers should spend resources if the​ ________.

expected benefits to the company exceed the expected costs

It is usually difficult to find good causeminus−andminus−effect relationships between​ ________ and a cost allocation base.

facility - sustaining costs

Technical consideration​ ________.

help mangers make wise economic decisions by providing them with the desired information

Period costs​ ________.

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

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

inventoriable costs

A budget​ ________.

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

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

its benefits exceed its implementation costs

What type of cost is the result of an event that results in more than one product or service​ simultaneously?

joint cost

A negative consequence of recording byproducts in the accounting records when the sale occurs is that​ ________.

managers can be tempted to stockpile byproducts

To apply CVP analysis in notminus−for profit organization​ ________.

managers need to focus on measuring their​ output, which is different from the tangible units sold by manufacturing and merchandising companies

Productminus−cost crossminus−subsidization ​________.

means that if a company undercosts one of its​ products, it will overcost at least one of its other products

Advocates of throughput costing argue that​ ________.

only direct material costs are included as inventoriable costs

In the merchandising sector​ ________.

only variable costs are subtracted to determine gross margin

Which of the following would be considered in a makeminus−orminus−buy ​decision?

potential rental income from space occupied by the production area

An favorable productionminus−volume variance occurs when​ ________.

production exceeds the denominator level

Which method of accounting recognizes byproducts in the financial statements at the time their production is​ completed?

production method

Budgeted fixed manufacturing costs of a product using practical capacity​ ________.

represents the cost per unit of supplying capacity

Answer the following questions using the information​ below: Products S5 and CP8 each are assigned​ $100.00 in indirect costs by a traditional costing system. An activity analysis revealed that although production requirements are​ identical, S5 requires 45 minutes less setup time than CP8. According to an ABC​ system, S5 uses a disproportionately ​ ________.

smaller amount of batch - level costs

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

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