Exam 1 and 2 Review

Depreciation on a personal computer used in the marketing department of a manufacturing firm would be classified as: A.a period cost that is fixed with respect to the company's output. B.a product cost that is fixed with respect to the company's output. C.a period cost that is variable with respect to the company's output. D.a product cost that is variable with respect to the company's output.

A.a period cost that is fixed with respect to the company's output.

Spoilage that is inherent in a production process under efficient operating conditions, is expected and cannot be avoided, is referred to as: A.Ordinary spoilage B.Normal spoilage C.Abnormal spoilage D.None of the above

B.Normal spoilage

hich 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.

Which one of the following items is a direct cost? A. Customer-service costs of a multiproduct firm; Product A is the cost object. B. Printing costs incurred for payroll check processing; payroll check processing is the cost object. C. The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object. D. Utility costs of the administrative offices; the accounting department is the cost object.

B. Printing costs incurred for payroll check processing; payroll check processing is the cost object.

Which method of allocating costs would be used if the selling prices of all products at the splitoff point are unavailable? A. sales value after splitoff method B. net realizable value method C. constant gross margin method D. physical measures method

B. net realizable value method

Costs of normal spoilage are usually accounted for as: A. part of the cost of goods sold B. part of the cost of goods manufactured C. a separate line item on the income statement D. a separate asset on the balance sheet

B. part of the cost of goods manufactured

When budgeted cost-allocations rates are used: A. variations in actual usage by one division affect the costs allocated to other divisions B. the manager of the supplier division bears the risk of unfavorable cost variances C. user divisions pay for costs that exceed budgeted amounts D. user divisions pay for inefficiencies of the supplier department

B. the manager of the supplier division bears the risk of unfavorable cost variances

Which statement is NOT true regarding the sales method of accounting for byproducts? A. the method makes no journal entries until the byproduct is sold B. this method is the preferred method because of the matching principle C. revenues of the byproduct can be recorded in the income statement as revenue D. revenues of the byproduct can be recorded as a reduction of cost of goods sold in the income statement

B. this method is the preferred method because of the matching principle

The dual-rate cost-allocation method classifies costs in each cost pool into a: A. budgeted-cost pool and an actual-cost pool B. variable-cost pool and a fixed-cost pool C. used-capacity-cost pool and a practical-capacity-cost pool D. direct-cost pool and a reciprocal-cost pool

B. variable-cost pool and a fixed-cost pool

Acuna Company designs, develops and markets a variety of products. Each product is designed according to customer specification. Once the design and development are complete, customers place orders on a weekly basis. Every time an order is received for a product, the machines must be set up and calibrated. Each unit of product must go through inspection before being shipped to the customer. The products are all assembled in a rented building in Whitman County. The activity of setting up equipment for each order is an example of: A.Unit-level costs B.Batch-level costs C.Product-sustaining costs D.Facility-sustaining costs

B.Batch-level costs

Which of the following statements concerning an organization's strategy is NOT true? A. Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. B. Management accountants provide input to help managers formulate strategy. C. A good strategy will always overcome poor implementation. D. Businesses usually follow one of two broad strategies: offering a quality product at a low price, or offering a unique product or service priced higher than the competition.

C. A good strategy will always overcome poor implementation.

Companies that attempt to achieve zero defects in the manufacturing process treat spoilage as: A. Scrap B. Reworked units C. Abnormal spoilage D. Normal spoilage

C. Abnormal spoilage

Question 5 Examples of the controller's functions include all EXCEPT: A. Operations administration B. Budgeting C. Investor relations D. General ledger

C. Investor relations

Which of the following is a sign that an activity-based costing system may be useful? A. There are small amounts of indirect costs. B. Products that a company is less suited to produce and sell show small profits. C. Products make diverse demands on resources because of differences in volume, process steps, batch size, or complexity. D. Operations staff agrees with accountants about the costs of manufacturing and marketing products and services.

C. Products make diverse demands on resources because of differences in volume, process steps, batch size, or complexity.

Transferred-in costs are treated as if they are: A. conversion costs added at the beginning of the process B. costs of beginning inventory added at the beginning of the process C. a separate direct material added at the beginning of the process D. direct labor costs added at the beginning of the process

C. a separate direct material added at the beginning of the process

The advantage of using normal costing instead of actual costing is: A. indirect costs are assigned at the end of the year when they are known B. the job cost is more accurate under normal costing C. indirect costs are assigned to a job on a timely basis D. normal costing provides a higher gross profit margin

C. indirect costs are assigned to a job on a timely basis

The benefits-received criteria for allocating joint costs indicate market-based measures are preferred because: A. physical measures such as volume are a clearer basis for allocating cost than other measures B. other measures are more difficult to calculate C. revenues are usually the best indicator of the benefits received D. None of these answers is correct.

C. revenues are usually the best indicator of the benefits received

If there is an ethical conflict concerning your direct supervisor, you may contact all of the following groups EXCEPT: A.the audit committee B.the executive committee C.the local media D.the board of directors

C. the local media

All of the following are true of the Work-in-Process Control account EXCEPT that: A.it tracks all direct material used in production B.the balance equals the sum of amounts from all in-process individual job-cost records C.it is a manufacturing costs expense account D.it tracks job costs from beginning through completion

C.it is a manufacturing costs expense account

Which support department cost allocation method considers the mutual services provided among all support departments, and is conceptually the most precise A.the direct method B.the step-down method C.the reciprocal method D.the incremental method

C.the reciprocal method

Modern cost accounting plays a role in: A. Planning new products B. Evaluating operational processes C. Controlling costs D. All of these answers are correct.

D. All of these answers are correct.

Which one of the following statements is true? A. In a job-costing system, individual jobs use different quantities of production resources. B. In a process-costing system each unit uses approximately the same amount of resources. C. An averaging process is used to calculate unit costs in a job-costing system. D. Both A and B are correct.

D. Both A and B are correct

Harvey Company owns a chain of ten clothing stores in the Seattle metropolitan area. The company owner and her administrative staff oversee the general operations from an office located in Kirkland. Each store is run by a manager with the help of three sales clerks. The stores are all leased and located in shopping malls. The owner is contemplating the possibility of starting a similar chain of stores in the Spokane area. She would oversee the operations of the additional stores without any additional administrative expenses. For the purpose of planning, which of the following cost is fixed with respect to the number of stores contemplated for Spokane? A. The total cost of clothing purchased for resale. B. The total rent cost of the stores in Spokane. C. The total salary expenses of the store managers. D. The total administrative expenses of the office in Kirkland.

D. The total administrative expenses of the office in Kirkland.

Which of the following statements is true in regard to the cause-and-effect relationship between allocated joint costs and individual products? A. A high individual product value results in a high level of joint costs. B. A low individual product value results in a low level of joint costs. C. A high individual product value results in a low level of joint costs. D. There is no cause-and-effect relationship.

D. There is no cause-and-effect relationship.

The value chain is the sequence of business functions in which: A. Value is deducted from the products or services of an organization. B. Value is proportionately added to the products or services of an organization. C. Products and services are evaluated with respect to their value to the supply chain. D. Usefulness is added to the products or services of an organization.

D. Usefulness is added to the products or services of an organization.

A reason why a physical-measure to allocate joint costs is less preferred than the sales value at splitoff is: A. a physical measure such as volume is difficult to estimate because of shrinkage B. physical volume usually has little relationship to the revenue producing power of products C. a physical measure usually results in the costs being allocated to the product that weighs the most D. all of the above are valid reasons why a physical-measure to allocate joint costs is less preferred than the sales value at splitoff.

D. all of the above are valid reasons why a physical-measure to allocate joint costs is less preferred than the sales value at splitoff.

Traditional cost systems distort product costs because: A. they recognize specific activities that are required to produce a product B. competitive pricing is ignored C. they emphasize financial accounting requirements D. they apply average support costs to each unit of product

D. they apply average support costs to each unit of product

Which of the following is NOT a primary reason for allocating joint costs? A. cost justification and insurance settlement cost information requirements B. cost justification and asset measurement C. income measurement and rate regulation requirements D. to calculate the bonus of the chief executive officer

D. to calculate the bonus of the chief executive officer

The Bradley Division of the Andreyeva Corporation currently leases a corporate suite in an office building for a cost of $150,000 a year. Only 80% of the corporate suite is currently being used. The Campbell Division has proposed a plan that would use the other 20% of the suite and increase the overall costs of maintaining the space by $30,000. If the incremental method were used, what amount of cost would be allocated to the Campbell Division? A.$60,000 B.$48,000 C.$36,000 D.$30,000

D.$30,000

If Noah Company has a higher degree of operating leverage than Tapanga Company, then: A.Tapanga Company's profits will be more sensitive to changes in sales. B.Tapanga Company is more profitable since it has lower variable costs. C.Noah Company has higher variable costs and lower fixed costs. D.Noah Company's profits will increase faster once sales exceed the break-even point.

D.Noah Company's profits will increase faster once sales exceed the break-even point.

Stott Company has a machine which it purchased a year ago for $6,000. The cost of operating the machine is $4,000 annually. The machine has a remaining useful life of 2 years, at the end of which it will have no disposal value. Presently, the old machine can be sold for $1,000. Stott has the option of buying a new machine to replace the current one. The new machine costs $5,000 and has a useful life of two years. Annual operating costs will be $1,000. The new machine will have no disposal value at the end of two years. Should Stott Company replace the old machine? A.No, it will cost $2,000 more in total over the next two years. B.No, it will cost $4,000 more in total over the next two years. C.Yes, it will cost $1,000 less in total over the next two years. D.Yes, it will cost $2,000 less in total over the next two years.

D.Yes, it will cost $2,000 less in total over the next two years.

To discourage unnecessary use of a support department, management might: A.not allocate any support department costs to user departments B.allocate a fixed amount of support department costs to each department regardless of use C.issue memos on useful services provided by the support department D.allocate support department costs based upon user department usage

D.allocate support department costs based upon user department usage

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 not relevant since it reduces the cost of the old equipment C.it is not relevant 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.it is relevant since it reduces the cost of the new equipment