cost exam 3
1) The variable overhead spending variance measures the difference between ________, multiplied by the actual quantity of variable overhead cost-allocation base used. A) the actual variable overhead cost per unit and the budgeted variable overhead cost per unit B) the standard variable overhead cost rate and the budgeted variable overhead cost rate C) the actual variable overhead cost per unit and the budgeted fixed overhead cost per unit D) the actual quantity per unit and the budgeted quantity per unit
A
12) A relevant cost is a cost that is a(n) ________. A) future cost B) past cost C) sunk cost D) non-cash expense
A
17) 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) difference between the fixed cost and variable cost associated with the cost driver D) difference between actual cost and estimated cost for each observation of the cost driver
A
18) Which of the following is true of an opportunity cost? A) It is the income foregone by not using a resource in an alternative way. B) The higher the opportunity costs, the lower is the relevant cost. C) It is recorded as an expense in the accounting records. D) It is an unavoidable cost that cannot be changed no matter what action is taken.
A
39) Which of the following costs is irrelevant in the decision making of a special order when there is idle production capacity? A) fixed manufacturing costs B) units sold C) material cost D) labor hours incurred
A
4) Which of the following is an example of sunk costs? A) wages to security staffs B) cost of purchasing raw materials C) cost of an alternative investment D) wages payable to skilled laborers to make a product
A
5) 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 marginal costing method D) the incremental costing method
A
1) The cost to be predicted is referred to as the ________. A) independent variable B) dependent variable C) cost driver D) regression
B
11) A relevant revenue is revenue that is a(n) ________. A) past revenue B) future revenue C) in-hand revenue D) earned revenue
B
14) Quantitative factors ________. A) include financial information, but not nonfinancial information B) can be expressed in monetary terms C) are always relevant when making decisions D) include employee morale
B
14) The flexible budget enables to highlight the differences ________. A) between actual costs and actual quantities versus budgeted costs and budgeted quantities for the actual output level B) between budgeted costs and budgeted quantities versus actual costs and budgeted quantities for the budgeted output level C) between budgeted costs and actual quantities versus budgeted costs and budgeted quantities for the actual output level D) between actual costs and actual quantities versus budgeted costs and budgeted quantities for the budgeted output level
B
15) Regression analysis ________. A) calculates the slope coefficient using only two observed values within the relevant range and their respective costs B) measures the average amount of change in the dependent variable associated with a unit change in one or more independent variables C) estimates the cost functions using the time-and-motion studies D) measures the variability or dispersion in a set of data points
B
16) The variable overhead efficiency variance measures the difference between the ________, multiplied by the budgeted variable overhead cost per unit of the cost-allocation base. A) budgeted quantity of the cost-allocation base used and the budgeted quantity of the cost-allocation base that should have been used to produce the actual output B) actual quantity of the cost-allocation base used and the budgeted quantity of the cost-allocation base that should have been used to produce the actual output C) actual cost incurred and the budgeted quantity of the cost-allocation base that should have been used to produce the actual output D) budgeted cost and the actual cost used to produce the actual output
B
17) Opportunity costs is defined as ________. A) the cost of manufacturing a one-time-only special order when a firm has excess capacity to make more products B) the contribution to operating income that is forgone by not using a limited resource in its next-best alternative use C) the sum of variable and fixed costs in a particular business function of the value chain, such as manufacturing costs or marketing costs D) the sum of variable and fixed costs in all business functions of the value chain, such as manufacturing costs or marketing costs
B
39) Which of the following is the correct mathematical expression is used to calculate variable overhead efficiency variance? A) (Actual rate − Budgeted rate) × Budgeted quantity B) (Actual quantity × Budgeted rate) - (Budgeted input quantity allowed for actual output × Budgeted rate) C) (Actual quantity ÷ Budgeted rate) − (Budgeted quantity ÷ Budgeted rate) D) (Actual quantity ÷ Budgeted rate) × Budgeted quantity allowed for actual output Answer: B
B
4) The formal process of choosing between alternatives is known as a(n) ________. A) relevant model B) decision model C) alternative model D) prediction model
B
4) Which of the following is the mathematical expression for the budgeted fixed overhead cost per unit of cost allocation base? A) Budgeted fixed overhead cost per unit of cost allocation base = Actual total costs in fixed overhead cost pool ÷ Budgeted total quantity of cost allocation base B) 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 C) Budgeted fixed overhead cost per unit of cost allocation base = Actual total costs in fixed overhead cost pool ÷ Actual total quantity of cost allocation base D) Budgeted fixed overhead cost per unit of cost allocation base = Budgeted total costs in fixed overhead cost pool ÷ Actual total quantity of cost allocation base
B
41) When machine-hours are used as a cost-allocation base, the item most likely to contribute to a favorable variable overhead efficiency variance is ________. A) excessive machine breakdowns B) skillful workforce C) additional machinery D) strengthened demand for the product
B
43) When variances are immaterial, which of the following statements is true of the journal entry to write-off the variable overhead variance accounts? A) Cost of Goods Sold account will always be debited. B) Unfavorable efficiency variance will be credited. C) Favorable efficiency variance will be credited. D) Cost of Goods Sold account will always be credited.
B
5) Which of the following is true in a decision to keep or replace existing equipment? A) The book value of the old equipment is relevant. B) The disposal value of the old equipment is relevant. C) Property taxes is relevant. D) Depreciation on the new equipment is relevant.
B
2) A $5,000 unfavorable flexible-budget variance indicates that ________. A) the flexible-budget amount exceeded actual variable manufacturing overhead by $5,000 B) the actual variable manufacturing overhead exceeded the flexible-budget amount by $5,000 C) the flexible-budget amount exceeded standard variable manufacturing overhead by $5,000 D) the standard variable manufacturing overhead exceeded the flexible-budget amount by $5,000
B) the actual variable manufacturing overhead exceeded the flexible-budget amount by $5,000
2) While calculating the costs of products and services, a standard costing system ________. A) allocates overhead costs on the basis of the actual overhead-cost rates B) uses standard costs to determine the cost of products C) does not keep track of overhead cost D) traces direct costs to output by multiplying the standard prices or rates by the actual quantities
B) uses standard costs to determine the cost of products
13) The high-low method ________. A) measures the difference between actual cost and estimated cost for each observation of the cost driver B) calculates the standard deviation of residuals C) calculates the slope coefficient using only two observed values within the relevant range and their respective costs D) measures how well the predicted values, y, based on the cost driver, X, match actual cost observations, Y
C
13) Which of the following is true of relevant information? A) All fixed costs are relevant. B) Future revenues and expenses are relevant. C) Past costs are not relevant. D) All fixed costs are not relevant.
C
15) 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
16) If Talium Services Inc. does not use one of its limited resources in the best possible way, the lost contribution to income could be called a(n) ________. A) business function cost B) carrying cost C) opportunity cost D) sunk cost
C
16) Which of the following statements shows a difference between simple regression and multiple regression? A) Simple regression uses more than one dependent and independent variables, whereas multiple regression uses only one dependent and independent variable. B) Simple regression uses only the independent variables, whereas multiple regression uses only dependent variables. C) Simple regression uses only one dependent and one independent variable, whereas multiple regression uses one dependent and more than one independent variable. D) Simple regression uses only one dependent variable and more than one independent variables, whereas multiple regression uses more than one dependent variable and only one independent variable
C
2) In the estimation of a cost function using quantitative analysis, the independent variable ________. A) is the cost to be predicted B) is the product of fixed costs and slope coefficient C) is the factor used to predict the dependent variable D) is the product of total costs and slope coefficient
C
2) Sunk costs ________. A) are future costs for decision making B) are avoidable costs C) are irrelevant for decision making D) are foregone contribution by not using a limited resource in its next-best alternative use
C
3) Place the following steps from the five-step decision process in order: A = Obtain information including historical costs B = Evaluate performance to provide feedback C = Make decisions choosing among alternatives D = Make predictions about the future E = Identify the problem and uncertainties A) A, E, D, B, C B) C, D, E, A, B C) E, A, D, C, B D) D, C, B, A, E
C
3) Which of the following is a step in developing budgeted variable overhead rates? A) identifying the fixed costs associated with direct manufacturing labor B) estimating the budgeted denominator level based on expected utilization of available capacity C) selecting the cost-allocation base to use in allocating machine-handling costs D) choosing the appropriate level of capacity or investment
C
5) In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are ________. A) allocated costs B) budgeted costs C) fixed costs D) variable costs
C
7) Which cost estimation method may use time-and-motion studies to analyze the relationship between inputs and outputs in physical terms? A) the accrual accounting method B) the high-low method C) the industrial engineering method D) the cash accounting method
C
1) Which of the following mathematical expression is used to calculate budgeted variable overhead cost rate per output unit? A) Budgeted output allowed per input unit × Budgeted variable overhead cost rate per input unit B) Budgeted input allowed per output unit ÷ Budgeted variable overhead cost rate per input unit C) Budgeted output allowed per input unit ÷ Budgeted variable overhead cost rate per input unit D) Budgeted input allowed per output unit × Budgeted variable overhead cost rate per input unit
D
12) When using the high-low method, the numerator of the equation that determines the slope is the ________. A) difference between the positive and negative values of dependent and independent variables B) difference between the fixed cost and variable cost associated with the cost driver C) difference between the high and low observations of the cost driver D) difference between the costs associated with highest and lowest observations of the cost driver
D
14) Put the following steps in order for using the high-low method of estimating a cost function: A = Identify the cost function B = Calculate the constant C = Calculate the slope coefficient D = Identify the highest and lowest observed values A) D C A B B) C D A B D) D C B A C) A D C B
D
15) Qualitative factors ________. A) generally are easily measured in quantitative terms B) are generally irrelevant for decision making C) may include either financial or nonfinancial information D) include customer satisfaction
D
17) When variable overhead efficiency variance is favorable, it can be safely assumed that the ________. A) actual rate per unit of the cost-allocation base is higher than the budgeted rate B) actual quantity of the cost-allocation base used is higher than the budgeted quantity C) actual rate per unit of the cost-allocation base is lower than the budgeted rate D) actual quantity of the cost-allocation base used is lower than the budgeted quantity
D
2) Feedback regarding previous actions may affect ________. A) future predictions B) implementation of the decision C) the decision model D) All of these answers are correct.
D
3) Sunk costs ________. A) are relevant B) are differential C) have future implications D) are ignored when evaluating alternatives
D
4) ________ is relevant in a decision to replace equipment. A) Warehouse rent costs B) Book value of old equipment C) Accumulated depreciation on old equipment D) Salvage value
D
40) Which of the following is an appropriate step when identifying relevant costs to make a business decision? A) assuming all variable costs are relevant B) assuming all fixed costs are irrelevant C) separating total costs into business function costs and full costs D) separating total costs into variable and fixed components
D
42) Which of the following journal entries is used to record actual variable overhead costs incurred? A) Accounts Payable Variable Overhead Control B) Variable Overhead Control Accounts Receivable C) Work-in-Process Control Variable Overhead Control D) Variable Overhead Control Accounts Payable
D
6) A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost? A) the book value of the old equipment B) the depreciation expense on the old equipment C) the loss on the disposal of the old equipment D) the setup cost of the new equipment
D
6) Which cost estimation method uses a formal mathematical method to develop cost functions based on past data? A) the cash accounting method B) the conference method C) the accrual accounting method D) the quantitative analysis method
D
7) What role does a trade-in allowance on old equipment play in a decision to retain or replace equipment? A) It is relevant since it increases the cost of the new equipment. B) It is irrelevant since it reduces the cost of the old equipment. C) It is irrelevant to the decision since it does not impact the cost of the new equipment. D) It is relevant since it reduces the cost of the new equipment.
D
Which of the following statements is true of the given journal entry? A) Osium overallocated variable manufacturing overhead. B) A $10,000 unfavorable spending variance was recorded. C) Work-in-Process is currently overstated. D) A $60,000 unfavorable efficiency variance was recorded.
D
24) Write a linear cost function equation for each of the following conditions. Use y for estimated costs and X for activity of the cost driver. a. Direct materials cost is $1.70 per pound b. Total cost is fixed at $8,000 per month regardless of the number of units produced. c. Auto rental has a fixed fee of $80.00 per day plus $2.00 per mile driven. d. Machine operating costs include $1,000 of maintenance per month, and $12.00 of coolant usage costs for each day the machinery is in operation.
a. y = $1.70X b. y = $8,000 c. y = $80 + $2.00X d. y = $1,000 + $12X
23) Write a linear cost function equation for each of the following conditions. Use y for estimated costs and X for activity of the cost driver. a. Direct manufacturing labor is $10 per hour. b. Direct materials cost $15.60 per cubic yard. c. Utilities have a minimum charge of $5,000, plus a charge of $0.30 per kilowatt-hour. d. Machine operating costs include $300,000 of machine depreciation per year, plus $100 of utility costs for each day the machinery is in operation.
a. y = $10X b. y = $15.60X c. y = $5,000 + $0.30X d. y = $300,000 + $100 X
