Cost Accounting Final

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The cumulative average-time learning model with a 90% learning curve indicates that if it takes 100 minutes to manufacture the first unit of a new model, then the second unit will take only 90 minutes to manufacture.

False: 100 x .90 = 90; (100 + X)/2 = 90; X = 80 minutes

The balance sheet, income statement, and statement of cash flows are used for financial accounting, but not for management accounting.

False

The best-designed strategies are valuable whether or not they are effectively implemented

False

The budget period for variable-overhead costs is typically less than 3 months.

False

The distinction between direct and indirect costs is clearly set forth in Generally Accepted Accounting Principles (GAAP).

False

The high-low method is more accurate than the regression method of estimating a cost function.

False

The longer the time horizon, the more likely that a cost will have a fixed cost behavior.

False

The sales forecast should primarily be based on statistical analysis with secondary input from sales managers and sales representatives.

False

The usual starting point in budgeting is to forecast net income.

False

The value of scrap material can have either a high or low sales value relative to the product with which it is associated.

False

The variable overhead efficiency variance can be interpreted the same way as the efficiency variance for direct-cost items.

False

To prepare budgets based on actual data from past periods is preferred since past inefficiencies are excluded.

False

Tracking what is happening in other companies is illegal.

False

Underallocated indirect costs occur when the allocated amount of indirect costs is greater than the amount incurred for that period.

False

Using multiple unit-level cost drivers generally constitutes an effective activity-based cost system.

False

When actual indirect costs exceed allocated indirect costs, indirect costs have been overapplied.

False

When spoiled goods have a disposal value, the net cost of spoilage is computed by adding the disposal value to the costs of the spoiled goods accumulated to the inspection point.

False

Work-in-Process Control will be decreased (credited) for the amount of direct-labor costs incurred.

False

If Option 1 costs $100 and Option 2 costs $80, then the differential cost is $180.

False: If Option 1 costs $100 and Option 2 costs $80, then the differential cost is $20.

If a company has a degree of operating leverage of 2.0, that means a 20% increase in sales will result in a 40% increase in variable costs.

False: If a company has a degree of operating leverage of 2.0, that means a 20% increase in sales will result in a 40% increase in operating income.

If the selling price per unit is $20 and the contribution margin percentage is 30%, then the variable cost per unit must be $6.

False: Then the variable cost per unit must be $14, [$20 - (.30 x $20)] = $14.

Absorption cost per unit is the best product cost to use for one-time-only special order decisions.

False: Variable cost per unit

Sensitivity analysis is a "what-if" technique that managers use to examine how a result will change if the originally predicted data are not achieved or if an underlying assumption changes.

True

Some fixed costs may be classified as direct manufacturing costs.

True

Technological innovation has led to shorter product-life cycles and a need to bring new products to market more rapidly.

True

The cost of a machine purchased last year will be irrelevant in a decision for next year.

True

The first-in, first-out (FIFO) process costing method assigns the cost of the previous accounting period's equivalent units in beginning work-in-process inventory to the first units completed and transferred out of the process.

True

The key to a company's success is creating value for customers while differentiating itself from its competitors.

True

The lump sum budgeted for fixed overhead will always be the same amount for the static budget and the flexible budget.

True

The only difference between the static budget and flexible budget is that the static budget is prepared using planned output.

True

The price quoted for a one-time-only special order may be less than the price for a long-term customer.

True

The same cost may be direct for one cost object and indirect for another cost object.

True

The smaller the vertical difference between actual costs and predicted costs the better the goodness of fit.

True

The static-budget variance can be subdivided into the flexible-budget variance and the sales-volume variance.

True

The weighted-average cost is the total of all costs entering the Work-in-Process account (whether they are from beginning work-in-process or from work started during the current period) divided by total equivalent units of work done to date.

True

Abnormal spoilage costs are not considered inventoriable costs under a job-costing system.

True

Counting spoiled units as part of output units in a process-costing system usually results in a higher cost per unit.

False

Standard costing is extremely useful when unique, high cost products are produced, as compared to the production of multiple products.

False

The Finished Goods Control account consists of actual manufacturing overhead costs rather than allocated manufacturing overhead costs.

False

Costs are accounted for in two basic stages: assignment followed by accumulation.

False

Management accounting: a. focuses on estimating future revenues, costs, and other measures to forecast activities and their results b. provides information about the company as a whole c. reports information that has occurred in the past that is verifiable and reliable d. provides information that is generally available only on a quarterly or annual basis

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

The person MOST likely to use management accounting information is a(n): a. banker evaluating a credit application b. shareholder evaluating a stock investment c. governmental taxing authority d. assembly department supervisor

D. assembly department supervisor

A cost object is always either a product or a service.

False

A favorable fixed overhead flexible-budget variance indicates that actual fixed costs exceeded the lump-sum amount budgeted.

False

A linear cost function can only represent fixed cost behavior.

False

ABC systems always provide decision-making benefits that exceed implementation costs.

False

After a budget is agreed upon and finalized by the management team, the amounts should not be changed for any reason.

False

An activity-based costing system is necessary for costing services that are similar.

False

An ideal database should consist of data that could be used for a single purpose only.

False

An unfavorable variable overhead efficiency variance indicates that variable overhead costs were wasted and inefficiently used.

False

Any linear cost function can be graphed by knowing only the slope coefficient.

False

Budgeting includes only the financial aspects of the plan and not any nonfinancial aspects such as the number of physical units manufactured.

False

Causes of a favorable variable overhead efficiency variance might include using lower-skilled workers than expected.

False

Companies typically wait for accurate information regarding actual manufacturing overhead costs before pricing a job.

False

Costing systems with multiple cost pools are considered ABC systems.

False

Equivalent units in beginning work in process + equivalent units of work done in the current period equals equivalent units completed and transferred out in the current period minus equivalent units in ending work in process.

False

Estimating the degree of completion for the calculation of equivalent units is usually easier for conversion costs than it is for direct materials.

False

Even in the face of changing conditions, attaining the original budget is critical.

False

Financial accounting reports financial and nonfinancial information that helps managers implement company strategies.

False

Fixed costs depend on the resources used, not the resources acquired.

False

For best results, cost management emphasizes independently coordinating supply chain activities within your company and not interfering with other companies.

False

Full costs of a product include variable costs, but not fixed costs.

False

If scrap is returned to the company's storeroom and inventoried, it should not have any value in the accounting records.

False

In CVP analysis, an assumption is made that the total revenues are linear with respect to output units, but that total costs are non-linear with respect to output units.

False

In a one-time special order situation, if the price offered by the potential buyer is less than the absorption cost per unit, then the producer should not accept the special offer.

False

In both job costing and process costing, normal spoilage attributable to a specific job is assigned to that job.

False

Indirect labor and distribution costs would most likely be in the same activity-cost pool.

False

Information regarding the causes of variances is provided when the master budget is compared with actual results.

False

It can be inferred that when there is a high correlation between two variables, one is the cause of the other.

False

It is assumed in CVP analysis that the unit selling price, unit variable costs, and unit fixed costs are known and constant.

False

It is best to compare this year's performance with last year's actual performance rather than this year's budget.

False

Long-run planning and short-run planning are best performed independently of each other.

False

Management accounting information focuses on external reporting.

False

Managers should use unitized fixed manufacturing overhead costs for planning and control.

False

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

False

Reducing defects helps to reduce costs, but it does not make the business more competitive.

False

Relevant revenues and relevant costs are the only information managers need to select among alternatives.

False

Revenues that remain the same for two alternatives being examined are relevant revenues.

False

Scrap and rework are considered to be the same thing by managerial accountants.

False

Simple regression is known as "simple" because it is much less complex than the high-low method.

False

Simply because activity-based costing systems employ more activity-cost drivers, they provide more accurate product costs than traditional systems.

False

Since fixed manufacturing overhead is fixed, it is not normally included in the operating budget.

False

A standard is attainable through efficient operations but allows for normal disruptions such as machine breakdowns and defective production.

True

A company may use job costing to assign costs to different product lines and then use process costing to calculate unit costs within each product line.

True

A company whose goal is zero defects would usually treat all spoilage as abnormal.

True

A four-quarter rolling budget encourages management to be thinking about the next 12 months.

True

A job-cost record is a source document, but individual items of the job-cost record may also have source documents.

True

A planned decrease in selling price would be expected to cause an increase in the quantity sold.

True

All unfavorable overhead variances decrease operating income compared to the budget.

True

An appropriate cost driver for shipping costs might be the number of units shipped.

True

An expected value is the weighted average of the outcomes, with the probability of each outcome serving as the weight.

True

Companies generally follow one of two basic strategies: 1) providing a quality product or service at low prices, or 2) offering a unique product or service often priced higher than competing products.

True

Companies with a greater proportion of fixed costs have a greater risk of loss than companies with a greater proportion of variable costs.

True

Cost management involves long-term and short-term decisions that attempt to increase value for customers and lower costs of products or services.

True

Cost-volume-profit analysis may be used for multi-product analysis when the proportion of different products remains constant.

True

Costs that are difficult to change over the short run are always variable over the long run.

True

Customers are demanding increased levels of performance in all aspects of the value chain and the supply chain.

True

Direct costs are traced the same way for actual costing and normal costing.

True

Economic plausibility is an important criterion for choosing a cost driver.

True

Equivalent units are calculated separately for each input.

True

For calculating the cost of products and services, a standard costing system does not have to track actual costs.

True

For fixed overhead costs, the flexible-budget amount is always the same as the static-budget amount.

True

Gross margin percentage can be used to compare the profitability of different jobs.

True

Grounds-maintenance costs incurred during the summer months will distort indirect-cost rates that are computed monthly.

True

Quality control costs may be a direct cost of the Manufacturing Department, but an indirect cost of an individual job.

True

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

True

If a manufacturer chooses to continue purchasing direct materials from a supplier because of the ongoing relationship that has developed over the years, the decision is based on qualitative factors.

True

If the selling price per unit of a product is $30, variable costs per unit are $20, and total fixed costs are $10,000 and a company sells 5,000 units, operating income would be $40,000.

True

If the selling price per unit of a product is $50, variable costs per unit are $40, and total fixed costs are $50,000, a company must sell 6,000 units to make a target operating income of $10,000.

True

In a homogeneous cost pool, all costs have a similar cause-and-effect relationship with the cost-allocation base.

True

Job costing and process costing systems share the same objective of estimating product costs.

True

Management accountants might provide information on decisions on whether to buy a product from outside or manufacture it in-house.

True

Managers generally have more control over efficiency variances than price variances.

True

Multicollinearity exists in multiple regression when two or more independent variables are highly correlated with each other.

True

Multicollinearity is NOT a concern in simple regression.

True

Normal spoilage adds to the cost of the job to which it is attributed in a job order costing system.

True

Process-costing journal entries and job-costing journal entries are similar with respect to direct materials and conversion costs.

True

Process-costing systems separate costs into cost categories according to the timing of when costs are introduced into the process.

True

Quantitative factors are always expressed in numerical terms.

True

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

True

There is never an efficiency variance for fixed costs.

True

Traditional systems are likely to undercost complex products with lower production volume.

True

Transferred-out costs are incurred in previous departments that are carried forward as the product's cost as it moves to a subsequent process in the production cycle.

True

Under the weighted-average method, the costs of normal spoilage are added to the costs of their related good units. Hence, the cost per good unit completed and transferred out equals the total costs transferred out divided by the number of good units produced.

True

Unit-level measures can distort product costing because the demand for overhead resources may be driven by batch-level or product-sustaining activities.

True

When administered wisely, budgets promote communication and coordination among the various subunits of the organization.

True

When estimating a cost function, cost behavior can be approximated by a linear cost function within the relevant range.

True

Manufacturing overhead costs are also referred to as: a. indirect manufacturing costs b. prime costs c. period costs d. direct material

a. indirect manufacturing costs

JJ White planned to use $82 of material per unit but actually used $80 of material per unit, and planned to make 1,200 units but actually made 1,000 units. The flexible-budget variance is: a. $2,000 favorable b. $14,000 unfavorable c. $16,400 unfavorable d. $2,400 favorable

a. $2,000 favorable

Classify each cost item into one of the business functions of the value chain, either (1) R&D, (2) design, (3) production, (4) marketing, (5) distribution, or (6) customer service. Item: a. cost of samples mailed to promote sales of a new product b. labor cost of workers in the manufacturing plant c. bonus paid to a person with a 90% satisfaction rating in handling customers with complaints d. transportation costs for shipping products to retail outlets

a. (4) marketing b. (3) production c. (6) customer service d. (5) distribution

Kaiser's Kraft Korner sells a single product. 7,000 units were sold resulting in $70,000 of sales revenue, $28,000 of variable costs, and $12,000 of fixed costs. Breakeven point in units is: a. 2,000 units b. 3,000 units c. 5,000 units d. None of these answers are correct.

a. 2,000 units $10X - $4X - $12,000 = 0; X = 2,000 units

A company's actual performance should be compared against budgeted amounts for the same accounting period so that: a. adjustments for future conditions can be included b. no feedback is possible c. inefficiencies of the past year can be included d. a rolling budget can be implemented

a. adjustments for future conditions can be included

ABC systems identify __________ costs used by products. a. all b. short-term fixed c. short-term variable d. long-term fixed

a. all

To set realistic selling prices: a. all costs should be allocated to products b. costs should only be allocated when there is a strong cause-and-effect relationship c. only unit-level costs and batch-level costs should be allocated d. only unit-level costs should be allocated

a. all costs should be allocated to products

Fixed costs: a. are considered variable costs over the long run b. provide less operating leverage c. reduce the risk of loss d. are graphed as a steeply sloped line

a. are considered variable costs over the long run

A budget should/can do all of the following EXCEPT: a. be prepared by managers from different functional areas working independently of each other b. be adjusted if new opportunities become available during the year c. help management allocate limited resources d. become the performance standard against which firms can compare the actual results

a. be prepared by managers from different functional areas working independently of each other

The flexible budget contains: a. budgeted amounts for actual output b. budgeted amounts for planned output c. actual costs for actual output d. actual costs for planned output

a. budgeted amounts for actual output

The account analysis method estimates cost functions: a. by classifying cost accounts as variable, fixed, or mixed based on qualitative analysis b. using time-and-motion studies c. at a high cost, which renders it seldom used d. in a manner that cannot be usefully combined with any other cost estimation methods

a. by classifying cost accounts as variable, fixed, or mixed based on qualitative analysis

When using the high-low method, the two observations used are the high and low observations of the: a. cost driver b. dependent variables c. slope coefficient b. residual term

a. cost driver

When spoiled goods have a disposal value, the net cost of the spoilage is computed by: a. deducting disposal value from the costs of the spoiled goods accumulated to the inspection point b. adding the costs to complete a salable product to the costs accumulated to the inspection point c. calculating the costs incurred to the inspection point d. None of these answers is correct.

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

In the computation of the cost per equivalent unit, the weighted-average method of process costing considers all the costs: a. entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period b. costs that have entered work in process from the units started or transferred in during the current accounting period c. that have entered work in process during the current accounting period from the units started or transferred in minus the costs associated with ending inventory d. that have entered work in process during the current accounting period from the units started or transferred in plus the costs associated with ending inventory

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

The BEST way to avoid misidentification of relevant costs is to focus on: a. expected future costs that differ among the alternatives b. historical costs c. unit fixed costs d. total unit costs

a. expected future costs that differ among the alternatives

When machine-hours are used as an overhead cost-allocation base and the unexpected purchase of a new machine results in fewer expenditures for machine maintenance, the MOST likely result would be to report a(n): a. favorable variable overhead spending variance b. unfavorable variable overhead efficiency variance c. favorable fixed overhead flexible-budget variance d. unfavorable production-volume variance

a. favorable variable overhead spending variance

The number of units in the sales budget and the production budget may differ because of a change in: a. finished goods inventory levels b. overhead charges c. direct material inventory levels d. sales returns and allowances

a. finished goods inventory levels

Normal spoilage is computed on the basis of the number of: a. good units that pass inspection during the current period b. units that pass the inspection point during the current period c. units that are 100% complete as to materials d. None of these answers is correct.

a. good units that pass inspection during the current period

ABC systems: a. highlight the different levels of activities b. limit cost drivers to units of output c. allocate costs based on the overall level of activity d. generally undercost complex products

a. highlight the different levels of activities

Which of the following will increase a company's breakeven point? a. increasing variable cost per unit b. increasing contribution margin per unit c. reducing its total fixed costs d. increasing the selling price per unit

a. increasing variable cost per unit

One-time-only special orders should only be accepted if: a. incremental revenues exceed incremental costs b. differential revenues exceed variable costs c. incremental revenues exceed fixed costs d. total revenues exceed total costs

a. incremental revenues exceed incremental costs

When there is excess capacity, it makes sense to accept a one-time-only special order for less than the current selling price when: a. incremental revenues exceed incremental costs b. additional fixed costs must be incurred to accommodate the order c. the company placing the order is in the same market segment as your current customers d. it never makes sense

a. incremental revenues exceed incremental costs

All of the following are true of the Work-in-Process Control account EXCEPT that: a. it tracks all direct material purchases b. the balance equals the sum of amounts from all in-process individual job-cost records c. it is an asset account d. it tracks job costs from beginning through completion

a. it tracks all direct material purchases

The focus of ABC systems is on: a. long-term decisions b. short-term decisions c. make-or-buy decisions d. special-pricing decisions

a. long-term decisions

To gain the benefits of budgeting __________ must understand and support the budget. a. management at all levels b. customers c. suppliers d. All of these answers are correct.

a. management at all levels

When standards are used to develop a budget: a. past inefficiencies are excluded b. benchmarking must also be used c. information is available at a low cost d. flexible-budget amounts are difficult to determine

a. past inefficiencies are excluded

If initial budgets prove unacceptable, planners achieve the MOST benefit from: a. planning again in light of feedback and current conditions b. deciding not to budget this year c. accepting an unbalanced budget d. using last year's budget

a. planning again in light of feedback and current conditions

Effective planning of fixed overhead costs includes all of the following EXCEPT: a. planning day-to-day operational decisions b. eliminating nonvalue-added costs c. planning to be efficient d. choosing the appropriate level of capacity

a. planning day-to-day operational decisions

The slope of the line of regression is the: a. rate at which the dependent variable varies b. rate at which the independent variable varies c. level of total fixed costs d. level of total variable costs

a. rate at which the dependent variable varies

The inspection point is the a. stage of the production cycle where products are checked to determine whether they are acceptable or unacceptable units b. point at which costs are allocated between normal and abnormal spoilage c. point at which the calculation of equivalent units is made d. None of these answers is correct.

a. stage of the production cycle where products are checked to determine whether they are acceptable or unacceptable units

The smaller the residual term the: a. stronger the relationship between the cost driver and costs b. weaker the relationship between the cost driver and costs c. steeper the slope of the cost function d. gentler the slope of the cost function

a. stronger the relationship between the cost driver and costs

A learning curve is a function: a. that measures the decline in labor-hours per unit due to workers becoming better at a job b. that increases at a greater rate as workers become more familiar with their tasks c. where unit costs increase as productivity increases d. that is linear

a. that measures the decline in labor-hours per unit due to workers becoming better at a job

An unfavorable price variance for direct materials might indicate: a. that the purchasing manager purchased in smaller quantities due to a change to just-in-time inventory methods b. congestion due to scheduling problems c. that the purchasing manager skillfully negotiated a better purchase price d. that the market had an unexpected oversupply of those materials

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

Which cost estimation method analyzes accounts in the subsidiary ledger as variable, fixed, or mixed using qualitative methods? a. the account analysis method b. the conference method c. the industrial engineering method d. the quantitative analysis method

a. the account analysis method

A production process which involves spoilage and rework occurs in: a. the manufacture of high precision tools b. semiconductor units c. the manufacture of clothing d. All of these answers are correct.

a. the manufacture of high precision tools

The cost per good unit in the weighted-average method is equal to the: a. total cost of direct materials and conversion costs per equivalent unit, plus a share of normal spoilage b. sum of the costs per equivalent unit of direct materials, and conversion costs c. total costs divided by total equivalent units d. None of these answers is correct.

a. total cost of direct materials and conversion costs per equivalent unit, plus a share of normal spoilage

When fixed costs are $100,000 and variable costs are 20% of the selling price, then breakeven sales are: a. $100,000 b. $125,000 c. $500,000 d. indeterminable

b. $125,000 $100,000 / (1- 0.20) = $125,000 in BE sales

Kaiser's Kraft Korner sells a single product. 7,000 units were sold resulting in $70,000 of sales revenue, $28,000 of variable costs, and $12,000 of fixed costs. If sales increase by $25,000, operating income will increase by: a. $10,000 b. $15,000 c. $22,200 d. None of these answers are correct.

b. $15,000 [($70,000 - $28,000) / $70,000] x $25,000 = $15,000

JJ White planned to use $82 of material per unit but actually used $80 of material per unit, and planned to make 1,200 units but actually made 1,000 units. The flexible-budget amount is: a. $80,000 b. $82,000 c. $96,000 d. $98,400

b. $82,000

Schuppener Company sells its only product for $18 per unit, variable production costs are $6 per unit, and selling and administrative costs are $3 per unit. Fixed costs for 10,000 units are $10,000. The contribution margin is: a. $12 per unit b. $9 per unit c. $11 per unit d. $8 per unit

b. $9 per unit $18 - $6 - $3 = $9

Which of the following statements about activity-based costing is NOT true? a. Activity-based costing is useful for allocating marketing and distribution costs. b. Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. c. Activity-based costing seeks to distinguish batch-level, product-sustaining, and facility-sustaining costs, especially when they are not proportionate to one another. d. Activity-based costing differs from traditional costing systems in that products are not cross-subsidized.

b. Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.

Place the following steps in order for estimating a cost function using quantitative analysis: A = Plot the data B = Estimate the cost function C = Choose the dependent variable D = Identify the cost driver a. D C A B b. C D A B c. A D C B d. D C B A

b. C D A B

Which of the following statements is FALSE? a. There is a cause-and-effect relationship between the cost driver and the level of activity. b. Fixed costs have cost drivers over the short run. c. Over the long run all costs have cost drivers. d. Volume of production is a cost driver of direct manufacturing costs.

b. Fixed costs have cost drivers over the short run.

Which of the following items is NOT an assumption of CVP analysis? a. Total costs can be divided into a fixed component and a component that is variable with respect to the level of output. b. When graphed, total costs curve upward. c. The unit-selling price is known and constant. d. All revenues and costs can be added and compared without taking into account the time value of money.

b. When graphed, total costs curve upward.

A plot of data that results in bunched points with little slope generally indicates: a. a strong relationship b. a weak relationship c. a positive relationship d. a negative relationship

b. a weak relationship

An updated costing system should: a. be installed even if the costs outweigh the additional benefits b. be tailored to fit the underlying operations rather than the current cost system c. focus specifically on the costing needs of the CFO d. provide all information for management decision needs

b. be tailored to fit the underlying operations rather than the current cost system

One reason indirect costs may be overapplied is because: a. the actual allocation base quantity exceeds the budgeted quantity b. budgeted indirect costs exceed actual indirect costs c. requisitioned direct materials exceed budgeted material costs d. Both a and b are correct.

b. budgeted indirect costs exceed actual indirect costs

Gathering cost information through observations and interviews from departments within an organization is known as the: a. account analysis method b. conference method c. industrial engineering method d. quantitative analysis method

b. conference method

If each furnace requires a hose that costs $20 and 2,000 furnaces are produced for the month, the total cost for hoses is: a. considered to be a direct fixed cost b. considered to be a direct variable cost c. considered to be an indirect fixed cost d. considered to be an indirect variable cost

b. considered to be a direct variable cost

The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is: a. cost accumulation b. cost assignment c. cost tracing d. conversion costing

b. cost assignment

If the tax rate is t, it is possible to calculate planned operating income by: a. dividing net operating income by t b. dividing net operating income by 1- t c. multiplying net operating income by t d. multiplying net operating income by 1- t

b. dividing net operating income by 1- t

The variance that is BEST for measuring operating performance is the: a. static-budget variance b. flexible-budget variance c. sales-volume variance d. selling-price variance

b. flexible-budget variance

The sum of all costs incurred in all business functions in the value chain (product design, manufacturing, marketing, and customer service, for example) is known as the: a. business cost b. full product cost c. gross product cost d. multiproduct cost

b. full product cost

Not counting spoiled units in the equivalent-unit calculation results in: a. lower cost per good unit. b. higher cost per good unit c. better management information d. Both a and c are correct.

b. higher cost per good unit

Financing decisions PRIMARILY deal with: a. the use of scarce resources b. how to obtain funds to acquire resources c. acquiring equipment and buildings d. preparing financial statements for stockholders

b. how to obtain funds to acquire resources

A master budget: a. includes only financial aspects of a plan and excludes nonfinancial aspects b. is an aid to coordinating what needs to be done to implement a plan c. includes broad expectations and visionary results d. should not be altered after it has been agreed upon

b. is an aid to coordinating what needs to be done to implement a plan

The accounting for scrap under process costing is similar to the accounting under: a. job costing when scrap is different for each job b. job costing when scrap is common to all jobs c. process costing when scrap is different for each job d. process costing when scrap is a common to all jobs

b. job costing when scrap is common to all jobs

Undercosting a particular product may result in: a. loss of market share b. lower profits c. operating inefficiencies d. understating total product costs

b. lower profits

Dougherty Company employs 20 individuals. Eight employees are paid $12 per hour and the rest are salaried employees paid $3,000 a month. How would total costs of personnel be classified? a. variable b. mixed c. a variable cost within a relevant range d. a fixed cost within a relevant range

b. mixed

A manufacturing plant produces two product lines: football equipment and hockey equipment. Direct costs for the football equipment line are the: a. beverages provided daily in the plant break room b. monthly lease payments for a specialized piece of equipment needed to manufacture the football helmet c. salaries of the clerical staff that work in the company administrative offices d. utilities paid for the manufacturing plant

b. monthly lease payments for a specialized piece of equipment needed to manufacture the football helmet

Unit-level cost drivers are most appropriate as an overhead assignment base when: a. several complex products are manufactured b. only one product is manufactured c. direct labor costs are low d. factories produce a varied mix of products

b. only one product is manufactured

Job costing: a. can only be used in manufacturing b. records the flow of costs for each customer c. allocates an equal amount of cost to each unit made during a time period d. is commonly used when each unit of output is identical

b. records the flow of costs for each customer

Unacceptable units of production that are discarded or sold for reduced prices are referred to as: a. reworked units b. spoilage c. scrap d. defective units

b. spoilage

An unfavorable variable overhead spending variance indicates that: a. variable overhead items were not used efficiently b. the price of variable overhead items was more than budgeted c. the variable overhead cost-allocation base was not used efficiently d. the denominator level was not accurately determined

b. the price of variable overhead items was more than budgeted

The breakeven point decreases if: a. the variable cost per unit increases b. total fixed costs decrease c. the contribution margin per unit decreases d. the selling price per unit decreases

b. total fixed costs decrease

If actual indirect-cost rates were calculated monthly rather than annually, then for the month of February with only 28 days: a. variable indirect-cost rates would be lower b. total indirect-cost rates would be higher c. fixed indirect-cost rates would be lower d. monthly output would be higher

b. total indirect-cost rates would be higher

ABC assumes all costs are __________ because over the long run management can adjust the amount of resources employed. a. fixed b. variable c. committed d. nondiscretionary

b. variable

A distinct feature of the FIFO process-costing method is that the: a. work done on beginning inventory before the current period is blended with the work done during the current period in the calculation of equivalent units b. work done on beginning inventory before the current period is kept separate from the work done during the current period in the calculation of equivalent units c. work done on ending inventory is kept separate from the work done during the current period in the calculation of equivalent units and is usually not included in the calculation d. FIFO process-costing method is only minimally different from the weighted-average process-costing method

b. work done on beginning inventory before the current period is kept separate from the work done during the current period in the calculation of equivalent units

For January, the cost components of a picture frame include $0.35 for the glass, $.65 for the wooden frame, and $0.80 for assembly. The assembly desk and tools cost $400. 1,000 frames are expected to be produced in the coming year. What cost function best represents these costs? a. y = 1.80 + 400X b. y = 400 +1.80X c. y = 2.20 + 1,000X d. y = 1.00 + 400X

b. y = 400 +1.80X

Trailhound Company operates on a contribution margin of 30% and currently has fixed costs of $200,000. Next year, sales are projected to be $1,000,000. An advertising campaign is being evaluated that costs an additional $30,000. How much would sales have to increase to justify the additional expenditure? a. $60,000 b. $90,000 c. $100,000 d. $300,000

c. $100,000 $30,000 / .3 = $100,000

JJ White planned to use $82 of material per unit but actually used $80 of material per unit, and planned to make 1,200 units but actually made 1,000 units. The sales-volume variance is: a. $2,000 favorable b. $14,000 unfavorable c. $16,400 unfavorable d. $2,400 favorable

c. $16,400 unfavorable

Kaiser's Kraft Korner sells a single product. 7,000 units were sold resulting in $70,000 of sales revenue, $28,000 of variable costs, and $12,000 of fixed costs. Contribution margin per unit is a. $4.00 b. $4.29 c. $6.00 d. None of these answers are correct.

c. $6.00

Kaiser's Kraft Korner sells a single product. 7,000 units were sold resulting in $70,000 of sales revenue, $28,000 of variable costs, and $12,000 of fixed costs. The number of units that must be sold to achieve $60,000 of operating income is: a. 10,000 units b. 11,666 units c. 12,000 units d. None of these answers are correct.

c. 12,000 units 10X - 4X - 12,000 = 60,000; X = 12,000 units

Place the following steps from the five-step decision process in order: A = Make predictions about future costs B = Evaluate performance to provide feedback C = Implement the decision D = Choose an alternative a. D C A B b. C D A B c. A D C B d. D C B A

c. A D C B

Place the four business functions in the order they appear along the value chain: A = Customer service B = Design C = Distribution D = Production a. A B D C b. A C D B c. B D C A d. B A D C

c. B D C A

When the amount of scrap is immaterial, the easiest accounting entry when recording scrap sold for cash is: a. Sales of Scrap Cash b. Cash Manufacturing Overhead Control c. Cash Sales of Scrap d. Accounts Receivable Sales of scrap

c. Cash Sales of Scrap

Actual (rather than allocated) manufacturing overhead costs are included in the: a. Work-in-Process Control account b. Finished Goods Control account c. Manufacturing Overhead Control account d. Both a and b are correct.

c. Manufacturing Overhead Control account

Which of the following companies is part of the merchandising sector of our economy? a. General Motors b. Intel c. The GAP d. Robert Meyer Accounting Firm

c. The GAP

Which of the following statements regarding manufacturing overhead allocation is FALSE? a. It includes all manufacturing costs that cannot be directly traced to a product or service. b. The costs can be grouped in either a single indirect-cost pool or in multiple indirect-cost pools. c. Total costs are unknown at the end of the accounting period. d. Allocated amounts are debited to Work-in-Process.

c. Total costs are unknown at the end of the accounting period.

Which of the following items is NOT an assumption of CVP analysis? a. Costs may be separated into separate fixed and variable components. b. Total revenues and total costs are linear in relation to output units. c. Unit selling price, unit variable costs, and unit fixed costs are known and remain constant. d. Proportion of different products will remain constant when multiple products are sold.

c. Unit selling price, unit variable costs, and unit fixed costs are known and remain constant.

Which of the following does NOT represent a cause-and-effect relationship? a. Material costs increase as the number of units produced increases. b. A company is charged 40 cents for each brochure printed and mailed. c. Utility costs increase at the same time that insurance costs increase. d. It makes sense that if a complex product has a large number of parts it will take longer to assemble than a simple product with fewer parts.

c. Utility costs increase at the same time that insurance costs increase.

Strategy is formulated by answering all of the following EXCEPT: a. Who are our most important customers? b. Is industry demand growing or shrinking? c. Will our external auditors certify our strategy? d. How sensitive are purchasers to price, quality, and service?

c. Will our external auditors certify our strategy?

When a bakery transfers goods from the Baking Department to the Decorating Department, the accounting entry is a. Work in Process — Baking Department Work in Process — Decorating Department b. Work in Process — Decorating Department Accounts Payable c. Work in Process — Decorating Department Work in Process — Baking Department d. Work in Process — Baking Department Accounts Payable

c. Work in Process — Decorating Department Work in Process — Baking Department

When machine-hours are used as an overhead cost-allocation base, the MOST likely cause of a favorable variable overhead spending variance is: a. excessive machine breakdowns b. the production scheduler efficiently scheduled jobs c. a decline in the cost of energy d. strengthened demand for the product

c. a decline in the cost of energy

Google, an internet search firm, would be classified as: a. a manufacturing-sector company b. a merchandising-sector company c. a service sector company d. None of these answers are correct.

c. a service sector company

All of the following are needed to prepare a flexible budget EXCEPT determining the: a. budgeted variable cost per output unit b. budgeted fixed costs c. actual selling price per unit d. actual quantity of output units

c. actual selling price per unit

The MAJOR challenge when planning fixed overhead is: a. calculating total costs b. calculating the cost-allocation rate c. choosing the appropriate level of capacity d. choosing the appropriate planning period

c. choosing the appropriate level of capacity

The purpose of the equivalent-unit computation is to: a. convert completed units into the amount of partially completed output units that could be made with that quantity of input. b. assist the business in determining ending inventory. c. convert partially completed units into the amount of completed output units that could be made with that quantity of input. d. Both b and c are correct.

c. convert partially completed units into the amount of completed output units that could be made with that quantity of input.

The approaches and activities of managers in short-run and long-run planning and control decisions that increase value for customers and lower costs of products and services are known as: a. value chain management b. enterprise resource planning c. cost management d. customer value management

c. cost management

The strategy MOST likely to reduce the breakeven point would be to: a. increase both the fixed costs and the contribution margin b. decrease both the fixed costs and the contribution margin c. decrease the fixed costs and increase the contribution margin d. increase the fixed costs and decrease the contribution margin

c. decrease the fixed costs and increase the contribution margin

Refining a cost system includes: a. classifying as many costs as indirect costs as is feasible b. creating as many cost pools as possible c. identifying the activities involved in a process d. seeking a lesser level of detail

c. identifying the activities involved in a process

Conversion costs: a. include all the factors of production b. include direct materials c. in process costing are usually considered to be added evenly throughout the production process d. Both b and c are correct.

c. in process costing are usually considered to be added evenly throughout the production process

Misleading cost numbers are MOST likely the result of misallocating: a. direct material costs b. direct manufacturing labor costs c. indirect costs d. All of these answers are correct.

c. indirect costs

The manufacturing overhead costs budget includes budgeted amounts for: a. direct materials b. direct manufacturing labor c. indirect manufacturing labor d. All of these answers are correct.

c. indirect manufacturing labor

When actual input data from past periods is used to develop a budget: a. past inefficiencies are excluded b. expected future changes are incorporated c. information is available at a low cost d. audited financial information must be used

c. information is available at a low cost

An accelerated need for refined cost systems is due to: a. global monopolies b. rising prices c. intense competition d. a shift toward increased direct costs

c. intense competition

The cost function y = 1,000 + 5X a. has a slope coefficient of 1,000 b. has an intercept of 5 c. is a straight line d. represents a fixed cost

c. is a straight line

In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the __________ allocated to a job. a. direct materials b. direct labor c. manufacturing overhead costs d. total costs

c. manufacturing overhead costs

Goodness-of-fit measures how well the predicted values in a cost estimating equation: a. match the cost driver b. determine the level of activity c. match the actual cost observations d. rely on the independent variable

c. match the actual cost observations

Cross-sectional data analysis includes: a. using a variety of time periods to measure the dependent variable b. using the highest and lowest observation c. observing different entities during the same time period d. comparing information in different cost pools

c. observing different entities during the same time period

Which of the following costs always differ among future alternatives? a. fixed costs b. historical costs c. relevant costs d. variable costs

c. relevant costs

The variance that LEAST affects cost control is the; a. flexible-budget variance b. direct-material-price variance c. sales-volume variance d. direct manufacturing labor efficiency variance

c. sales-volume variance

Relevant costs of a make-or-buy decision include all of the following EXCEPT: a. fixed salaries that will not be incurred if the part is outsourced b. current direct material costs of the part c. special machinery for the part that has no resale value d. material-handling costs that can be eliminated

c. special machinery for the part that has no resale value

In a standard costing system, a cost-allocation base would MOST likely be: a. actual machine-hours b. normal machine-hours c. standard machine-hours d. Any of these answers is correct.

c. standard machine-hours

An unfavorable variance indicates that: a. actual costs are less than budgeted costs b. actual revenues exceed budgeted revenues c. the actual amount decreased operating income relative to the budgeted amount d. All of these answers are correct.

c. the actual amount decreased operating income relative to the budgeted amount

Cost-volume-profit analysis assumes all of the following EXCEPT: a. all costs are variable or fixed b. units manufactured equal units sold c. total variable costs remain the same over the relevant range d. total fixed costs remain the same over the relevant range

c. total variable costs remain the same over the relevant range

Overhead costs have been increasing due to all of the following EXCEPT: a. increased automation b. more complexity in distribution processes c. tracing more costs as direct costs with the help of technology d. product proliferation

c. tracing more costs as direct costs with the help of technology

With traditional costing systems, products manufactured in small batches and in small annual volumes may be __________ because batch-related and product-sustaining costs are assigned using unit-related drivers. a. overcosted b. fairly costed c. undercosted d. ignored

c. undercosted

Overcosting of a product is MOST likely to result from: a. misallocating direct labor costs b. overpricing the product c. undercosting another product d. understating total product costs

c. undercosting another product

If there was limited capacity, all of the following amounts would change EXCEPT: a. opportunity costs b. differential costs c. variable costs d. the minimum acceptable price

c. variable costs

Which of the following is an equation of a variable cost function? a. y = b b. y = a + bX c. y = bX d. y = a

c. y = bX

A difference between job costing and process costing is that: a. job-costing systems usually do not distinguish between normal spoilage attributable to all jobs and normal spoilage attributable to a specific job b. job-costing systems usually distinguish between normal spoilage attributable to a specific job and spoilage common to all jobs c. process costing normally does not distinguish between normal spoilage attributable to a specific job and spoilage common to all jobs d. Both b and c are correct.

d. Both b and c are correct.

A flexible-budget variance is $800 favorable for unit-related costs. This indicates that costs were: a. $800 more than the master budget b. $800 less than for the planned level of activity c. $800 more than standard for the achieved level of activity d. $800 less than standard for the achieved level of activity

d. $800 less than standard for the achieved level of activity

Accounting for rework in a process-costing system: a. accounts for normal rework in the same way as a job-costing system b. requires abnormal rework to be distinguished from normal rework c. if the rework is normal, then rework is accounted for in the same manner as accounting for normal rework common to all jobs d. All of these answers are correct.