Managers use management accounting information to:

A) help external users such as investors, banks, regulators, and suppliers

B) communicate, develop, and implement strategies
C) communicate a firm's financial position to investors, banks, regulators,
and other outside parties
D) ensure that financial statements are consistent with the SEC rules
Which of the following statements about customer value is true?
A) Customer value is shown in a corporation's balance sheet.
B) Creating value for customers is an important part of planning and
implementing strategy.
C) Customer value is the only focus that helps managers to formulate
strategies.
D) Customer value is lost with increase in costs of the product.
Financial accounting is concerned primarily with:
A) external reporting to investors, creditors, and government authorities
B) cost planning and cost controls
C) product design and marketing strategies
D) providing information for strategic and tactical decisions
________ is the detailed planning and engineering and testing of products,
services, or processes.
A) Plan of implementation B) Design
C) Production D) Research and development
Which of the tools shown below would be the most effective planning tool?
A) performance evaluation report B) fishbone diagram
C) control chart D) budget
Which of the following factors affect the direct/indirect classification of a
cost?
A) the level of budgeted profit for the next year
B) the estimation of time required to complete the order
C) the ability to execute an order in the most cost-efficient manner
D) the design where a particular area is dedicated to a specific cost object
A manufacturing plant produces two product lines: golf equipment and soccer
equipment. An example of a direct cost for the golf equipment line is:
A) beverages provided daily in the plant break room for the entire staff
B) monthly lease payments for a specialized piece of equipment needed to
manufacture the golf driver
C) salaries of the clerical staff that work in the company administrative
offices
D) overheads incurred in producing both golf and soccer equipment
A manufacturing plant produces two product lines: golf equipment and soccer
equipment. An example of indirect cost for the soccer equipment line is the:
A) material used to make the soccer balls
B) labor to shape the leather used to make the soccer ball
C) material used to manufacture the soccer studs
D) property taxes paid on the land and building plant
Which of the following statements is true?
A) A direct cost of one cost object will always be a direct cost of another cost
object.
B) Because of a cost-benefit tradeoff, some direct costs may be treated as
indirect costs.
C) All fixed costs are indirect costs.
D) All direct costs are variable costs.
Which of the following is true if the production volume decreases?
A) fixed cost per unit increases
B) average cost per unit decreases
C) variable cost per unit increases
D) variable cost per unit decreases
Within the relevant range, if there is a change in the level of the cost driver,
then:
A) total fixed costs and total variable costs will change
B) total fixed costs and total variable costs will remain the same
C) total fixed costs will remain the same and total variable costs will change
D) total fixed costs will change and total variable costs will remain the same
The East Company manufactures several different products. Unit costs
associated with Product ORD105 are as follows:
Direct materials $92
Direct manufacturing labor 32
Varaiable manufacturing overhead 12
Fixed manufacturing overhead 32
Sales commissions (2% of sales) 26
Administrative salaries 6
Total $200
What is the percentage of the total variable costs per unit associated with
Product ORD105 with respect to total cost?
A) 81% B) 68% C) 84% D) 71%
When 25,000 units are produced, fixed costs are $21.00 per unit. Therefore,
when 20,000 units are produced, fixed costs will:
A) increase to $26.25 per unit B) remain at $21.00 per unit
C) decrease to $16.80 per unit D) total $420,000
Atlas Manufacturing produces a unique valve, and has the capacity to
produce 50,000 valves annually. Currently Atlas produces 40,000 valves and
is thinking about increasing production to 45,000 valves next year. What is
the most likely behavior of total manufacturing costs and unit manufacturing
costs given this change?
A) Total manufacturing costs will increase and unit manufacturing costs will
stay the same.
B) Total manufacturing costs will increase and unit manufacturing costs will
decrease.
C) Total manufacturing costs will stay the same and unit manufacturing costs
will stay the same.
D) Total manufacturing costs will increase and unit manufacturing costs will
also increase.
Which of the following is NOT reported on the income statement of a
manufacturing firm?
A) cost of goods sold
B) administrative and selling expenses
C) work in progress
D) marketing and distribution costs
Generation X Fashions Inc. sells 400 units resulting in $8,000 of sales
revenue, $4,000 of variable costs, and $1,500 of fixed costs. Contribution
margin per unit is: (Round the final answer to the nearest cent.)
A) $23.75 B) $20.00 C) $10.00 D) $6.25
The contribution income statement highlights:
A) gross margin
B) the segregation of costs into period costs and inventoriable costs
C) different product lines
D) variable and fixed costs
SaleCo sells 8,200 units resulting in $100,000 of sales revenue, $35,000 of
variable costs, and $55,000 of fixed costs. The contribution margin
percentage is:
A) 45% B) 65% C) 10% D) 35%
Sparkle Jewelry sells 500 units resulting in $80,000 of sales revenue, $30,000
of variable costs, and $26,000 of fixed costs. Breakeven point in units is:
A) 300 units B) 540 units C) 560 units D) 260 units
Slickware sells porcelain cups. The breakeven point is 5,000 units. The
variable cost per unit is $21 and the fixed costs are $20,000. What is the
selling price?
A) $25 B) $42 C) $46 D) $29
Ruben is a travel agent. He intends to sell his customers a special round-trip
airline ticket package. He is able to purchase the package from the airline for
$170 each. The round-trip tickets will be sold for $240 each and the airline
intends to reimburse Ruben for any unsold ticket packages. Fixed costs
include $5,500 in advertising costs. How many ticket packages will Ruben
need to sell in order to achieve $80,000 of operating income? (Round the
final calculation up to the next whole number.)
A) 79 packages B) 1,143 packages
C) 357 packages D) 1,222 packages
All else being equal, a reduction in selling price will:
A) increase contribution margin
B) reduce fixed costs
C) increase variable costs
D) reduce operating income
________ is the process of assigning indirect costs to products.
A) Cost allocation B) Job cost recording
C) Cost pooling D) Cost tracing
Job costing:
A) cannot be used by the service industry
B) records the flow of costs for each product or service
C) allocates an equal amount of cost to each unit made during a time period
D) is used when each unit of output is identical
An example of a denominator reason for calculating annual indirect-cost rates
includes:
A) budgeted annual indirect costs divided by actual quantity of cost-
allocation base
B) semi-annual insurance payments in March and September
C) higher levels of output demanded during the fall months
D) prepaid rent in January for the months January through June
X-Industries manufactures 3-D printers. For each unit, $3,100 of direct
material is used and there is $2,500 of direct manufacturing labor at $25 per
hour. Manufacturing overhead is applied at $30 per direct manufacturing
labor hour. Calculate the profit earned on 45 units if each unit sells for
$10,000.
A) $104,250 B) $81,750 C) $63,000 D) $3,000
Which of the following statements about normal costing is true?
A) Direct costs and indirect costs are traced using an actual rate.
B) Direct costs and indirect costs are traced using budgeted rates.
C) Direct costs are traced using a budgeted rate, and indirect costs are
allocated using an actual rate.
D) Direct costs are traced using an actual rate, and indirect costs are allocated
using a budgeted rate.
In a normal costing system, the Manufacturing Overhead Control account:
A) is increased by allocated manufacturing overhead
B) is credited with amounts transferred to Work-in-Process
C) is decreased by allocated manufacturing overhead
D) is debited with actual overhead costs
Which of the following increases (are debited to) the Work-in-Process
Control account?
A) actual plant insurance costs B) customer services costs
C) marketing expenses D) direct manufacturing labor costs
Franklin Inc. manufactures pipes and applies manufacturing overhead costs to
production at a budgeted indirect-cost rate of $15 per direct labor-hour. The
following data are obtained from the accounting records for June 2020:
Direct materials $100,000
Direct labor (4,700 hours @ $12/hour) 56,400
Indirect labor 10,000
Plant facility rent 26,000
Depreciation on plant machinery and equipment 25,000
Sales commissions 20,000
Administrative expenses 39,000
For June 2020, manufacturing overhead is:
A) overallocated by $9,500 B) underallocated by $29,500
C) overallocated by $29,500 D) underallocated by $9,500
Overcosting a particular product may result in:
A) pricing the product too high
B) pricing the product too low
C) operating efficiencies
D) understating total product costs
Which of the following is a reason that has accelerated the demand for
refinements to the costing system?
A) The declining demand for customized products has led managers to
decrease the variety of products and services their companies offer.
B) The use of product and process technology has led to an increase in
indirect costs and a decrease in direct costs.
C) The increased of automated processes has led to the increase in direct
manufacturing cost leading to a decrease in break-even point.
D) The increasing competition in product markets has led to an increase in
contribution margin resulting in a decrease of break-even point.
The fundamental cost objects of ABC are:
A) activities B) cost drivers C) products D) services
Extracts from cost information of Hebar Corp.:
Simple L3 Complex L7 Total
Setup cost allocated using
direct labor-hours $19,700 $7,300 $27,000
Setup cost allocated using
setup-hours $13,700 $13,300 $27,000
Assuming that setup-hours is considered a more effective cost drive for
allocating setup costs than direct labor-hours. Which of the following
statements is true of Hebar's setup costs under traditional costing?
A) L3 is undercosted by $6,000
B) L7 is undercosted by $5,900
C) L3 is overcosted by $6,000
D) L7 is overcosted by $6,000
Activity-based costing (ABC) can eliminate cost distortions because ABC
systems:
A) establish a cause-and-effect relationship with the activities performed
B) use single cost pool for all overhead costs, thereby enabling simplicity
C) use a broad average to allocate all overhead costs
D) never consider interactions between different departments in assigning
support costs
For a company which produce its products in batches, the CEO's salary is
a(n) ________ cost.
A) batch-level
B) output unit-level
C) facility-sustaining
D) product-sustaining
Advanced Technology Products produces 10 different fasteners. Each time
a type of fastener is produced, the equipment must be stopped and items such
as filters and drill bits must be changed, oil must be added to the equipment
and some parts need lubrication. This work must be done before the
products can be produced; the costs related to this activity would be part of
which cost pool?
A) output-level costs
B) batch-level costs
C) product-sustaining costs
D) service-sustaining costs
For a business that offers customers a store where product can be purchased
and picked up or a delivery service that can ship the product directly to the
customer, which of the following would most likely be the best cost
allocation base for distribution costs?
A) number of customer service phone calls and emails per period
B) number of pounds of product shipped or delivered
C) electricity costs for the period
D) number of products sold
Which of the following best describes a rolling budget?
A) It is a budget that continually outlines the amount required to roll over
debt in a future period.
B) It is created continually by adding a month, quarter, or year to the period
just ended.
C) It is a budget that outlines budgeted expenses while utilizing a moving
average.
D) It is a budget that is submitted to a bank at the beginning of every month
as per a loan covenant.
In which order are the following developed? First to last:
A = Production budget
B = Direct materials costs budget
C = Budgeted income statement
D = Revenues budget
A) ABDC B) DABC C) DCAB D) CABD
Antique Brass Company has budgeted sales volume of 120,000 units and
budgeted production of 113,000 units, while 21,000 units are in beginning
finished goods inventory. How many units are targeted for ending finished
goods inventory?
A) 21,000 units B) 28,000 units C) 7,000 units D) 14,000 units
Tom Magic Company manufactures various kinds of toys for different age
groups. The company's flagship product is Rx. The company currently
requires 8.50 labor hours to manufacture per unit of Rx. The company
believes that because of numerous small improvements in the process, it will
require 0.10 labor-hours less and hence will only 8.40 labor-hours in the next
quarter. It will require 8.35 and 8.25 labor-hours in third and fourth quarter.
The company has adopted:
A) activity-based budgeting
B) kaizen budgeting
C) zero-based budgeting
D) cost-based budgeting
Johnson Company had planned for operating income of $10 million in the
master budget with a contribution margin of $3 million, but actually achieved
operating income of only $7 million and a contribution margin of $2.5
million.
A) The static-budget variance for operating income is $3 million favorable.
B) The static-budget variance for operating income is $3 million unfavorable.
C) The flexible-budget variance for operating income is $3 million favorable.
D) The flexible-budget variance for operating income is $3 million
unfavorable.
A company budgets 11,000 units of sales based on a projected selling price of
$14. The actual units sold were 18,000 at a price of $9. What is the flexible
budget for sales?
A) $252,000 B) $162,000 C) $154,000 D) $99,000
An unfavorable flexible-budget variance for variable costs may be:
A) using more input quantities than were budgeted
B) paying lower prices for inputs than were budgeted
C) selling output at a higher selling price than budgeted
D) selling less quantity compared to the budgeted
A favorable efficiency variance for direct manufacturing labor indicates that:
A) a lower wage rate than planned was paid for direct labor
B) a higher wage rate than planned was paid for direct labor
C) less direct manufacturing labor-hours were used during production than
planned for actual output
D) more direct manufacturing labor-hours were used during production than
planned for actual output
Mid City Products Inc. (MCP), developed standard costs for direct material
and direct labor. In 2020, MCP estimated the following standard costs for one
of their most popular products.
Budgeted quantity Budgeted price
Direct materials 1 pounds $8.60 per pound
Direct labor 0.20 hours $13.00 per hour
During September, MCP produced and sold 1,000 units using 1,400 pounds
of direct materials at an average cost per pound of $8.00 and 160 direct labor
hours at an average wage of $13.50 per hour. The direct material price
variance during September is:
A) $840 favorable B) $840 unfavorable
C) $2,600 unfavorable D) $2,600 favorable
Madden's Camera Shop has prepared the following flexible budget for
September and is in the process of interpreting the variances. F denotes a
favorable variance and U denotes an unfavorable variance.
Flexible Variances
Budget Price Efficiency
Material A $26,000 $1,200U $1,600F
Material B 39,000 400F 800U
Material C 46,000 1,400U 2,400F
The actual amount spent for Material B was:
A) $38,600 B) $37,800 C) $40,200 D) $39,400
Compared to variable overhead costs planning, fixed overhead cost planning
has an additional strategic issue beyond undertaking only essential activities
and efficient operations. That additional requirement is best described as:
A) focusing on the highest possible quality
B) increasing the linearity between total costs and volume of production
C) choosing the appropriate level of capacity that will benefit the company in
the long-run
D) identifying essential value-adding activities
Fixed overhead costs include:
A) the cost of sales commissions
B) leasing of machinery used in a factory
C) energy costs
D) indirect materials
Effective planning of fixed overhead costs includes:
A) planning day-to-day operational decisions
B) eliminating value-added costs
C) determining which products are to be produced
D) choosing the appropriate level of investment in productive assets
Which of the following best defines standard costing?
A) It is the same as actual costing but done in real time.
B) It is a system that traces direct cost to output by multiplying actual process
or rates by actual quantities of inputs + allocates overhead by on the basis of
actual quantities of the allocation base used.
C) It is a system that traces direct costs to output produced by multiplying the
standard prices or rates by the standard quantities of inputs allowed for the
actual output produced.
D) It is a system that allocates overhead costs on the basis of standard
overhead cost rates times the actual quantities of the allocation based used.
Teddy Company uses a standard cost system. In May, $234,000 of variable
manufacturing overhead costs were incurred and the flexible-budget amount
for the month was $240,000. Which of the following variable manufacturing
overhead entries would have been recorded for May?
A) Accounts Payable Control and other accounts 240,000
Work-in-Process Control 240,000
B) Work-in-Process Control 240,000
Variable Manufacturing Overhead Allocated 240,000
C) Work-in-Process Control 234,000
Accounts Payable Control and other accounts 234,000
D) Accounts Payable Control and other accounts 234,000
Variable Manufacturing Overhead Control 234,000
Lazy Guy Corporation manufactured 6,000 chairs during June.
The following variable overhead data relates to June:
Budgeted variable overhead cost per unit=$10.00. Actual variable
manufacturing overhead cost=$52,800. Flexible-budget amount for variable
manufacturing overhead=$46,900. Variable manufacturing overhead
efficiency variance=$790 unfavorable.
What is the variable overhead spending variance?
A) $5,110 favorable B) $5,900 favorable
C) $5,900 unfavorable D) $5,110 unfavorable
Which of the following is the correct mathematical expression to calculate
the fixed overhead spending variance?
A) Static-budget amount - Flexible-budget amount
B) Actual costs incurred - Flexible-budget amount
C) Static-budget amount - Fixed overhead allocated for actual output
D) Flexible-budget amount - Fixed overhead allocated for actual output
Variances Spending Efficiency Volume
Variable manufacturing overhead $ 7,300 F $35,000 U (B)
Fixed manufacturing overhead $28,300 U (A) $90,000 U
The total production-volume variance should be:
A) $90,000 F B) $90,000 U C) $118,300 F D) $118,300 U
The fixed overhead cost variance can be further subdivided into the:
A) price variance and the efficiency variance
B) spending variance and flexible-budget variance
C) production-volume variance and the efficiency variance
D) flexible-budget variance and the production-volume variance
Which of the following costs is inventoried when using variable costing?
A) rent on factory building
B) electricity consumed in manufacturing process
C) sales commission paid on each sale
D) advertising costs incurred for the product
When reviewing the income statements of a firm prepared under both
absorption costing and variable costing, which of the following observation
would be made?
A) Ending finished goods will differ between the two methods due to the
different handling of fixed production costs.
B) Ending finished goods to be reported under the two methods will be equal.
C) Cost of goods sold will be the same under both methods however,
operating income will differ.
D) Gross margin will differ under both methods but operating income will be
the same.
Under absorption costing, if a manager's bonus is tied to operating income,
then increasing inventory levels compared to last year would result in:
A) greater operating income and therefore increasing the manager's bonus
B) less operating income and therefore decreasing the manager's bonus
C) not affecting the manager's bonus
D) being unable to determine the manager's bonus using only the above
information
If 1,000 units are produced and only 700 units are sold, ________ results in
the greatest amount of expense reported on the income statement.
A) throughput costing
B) variable costing
C) absorption costing
D) job costing
Which of the following cost estimation methods involves determination of
cost functions based on analysis and opinions about costs and their drivers
gathered from various departments of a company?
A) Industrial engineering method.
B) Conference method.
C) Account analysis method.
D) Quantitative analysis method
What is a plausible explanation of a cost function has a slope coefficient of
$30 for purchases of 1 to 1,000 units and $25 for production of 1,100-2,000
units, and $20 for production of 2,001-3,000 units?
A) the fixed cost per unit has decreased because of efficiencies
B) economies of scale allowing for lower cost purchases with larger orders
C) their is a linear cost function in effect
D) contribution margins are decreasing
To complete the first setup on a new machine took an employee 350 minutes.
Using an 84% cumulative average-time learning curve indicates that the
second setup on the new machine is expected to take:
A) 322minutes B) 147 minutes C) 238 minutes D) 294 minutes
Flash City Inc. manufactures small flash drives and is considering raising the
price by 75 cents a unit for the coming year. With a 75-cent price increase,
demand is expected to fall by 7,000 units.
 Current Projected
Demand 79,000 units 72,000 units
Selling price $8.75 $9.50
Incremental cost per unit $5.80 $5.80
If the price increase is implemented, operating profit is projected to:
A) increase by $33,350 B) decrease by $5250
C) increase by $5250 D) decrease by $7000
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
Dantley's Furniture manufactures rustic furniture. The cost accounting system
estimates manufacturing costs to be $180 per table, consisting of 80%
variable costs and 20% fixed costs. The company has surplus capacity
available. It is Back Forrest's policy to add a 55% markup to full costs.
Dantley's Furniture is invited to bid on a one-time-only special order to
supply 120 rustic tables. What is the lowest price Dantley's Furniture should
bid on this special order?
A) $16,200 B) $17,280 C) $21,600 D) $29,160
W.T. Ginsburg Engine Company manufactures part ACT31107 used in
several of its engine models. Monthly production costs for 1000 units are as
follows:
Direct materials $45,000
Direct labor 9500
Variable overhead costs 29,500
Fixed factory overhead 20,000
Total costs $104,000
It is estimated that 7% of the fixed overhead costs assigned to ACT31107
will no longer be incurred if the company purchases ACT31107 from the
outside supplier. W.T. Ginsburg Engine Company has the option of
purchasing the part from an outside supplier at $94.75 per unit. If W.T.
Ginsburg Engine Company purchases 1000 ACT31107 parts from the outside
supplier per month, then its monthly operating income will: (Round any
intermediary calculations and your final answer to the nearest cent.)
A) increase by $9350
B) increase by $21,650
C) decrease by $9350
D) decrease by $21,650
Kinnane's Fine Furniture manufactures two models, Standard and Premium.
Weekly demand is estimated to be 103 units of the Standard Model and 71
units of the Premium Model. The following per unit data apply:
Standard Premium
Contribution margin per unit $18 $20
Number of machine-hours required 3 4
If there are 720 machine-hours available per week, how many rockers of each
model should Kinnane produce to maximize profits?
A) 103 units of Standard and 47 units of Premium
B) 71 units of Standard and 71 units of Premium
C) 103 units of Standard and 71 units of Premium
D) 83 units of Standard and 62 units of Premium
Magic Corporation manufactures water toys. It plans to grow by producing
high-quality water toys that are delivered in a timely manner. There are a
number of other manufacturers who produce similar water toys. Magic
believes that continuously improving its manufacturing processes and re-
engineering processes to downsize and eliminate excess capacity are critical
to implementing its strategy. Which of the following best describes Magic's
strategy?
A) product differentiation
B) product leadership
C) cost differentiation
D) cost leadership
Which of the following questions best relates to the balanced scorecard's
internal business processes perspective?
A) How do we streamline operations to lower costs to increase profits?
B) How do we motivate employees so that they can become more
productive?
C) How can we increase our market share?
D) How can our processes be executed in such a way as to l increase value to
customers?
Which of the following is a measure of the balanced scorecard's customer
perspective?
A) number of client complaints
B) defect rates
C) number of process improvements
D) revenue growth
The gross margin percentage is an example of the ________ measure of a
balanced-scorecard.
A) internal business process perspective
B) customer perspective
C) learning and growth perspective
D) financial perspective
________ are the subdivisions of income that management accountants use
for the strategic analysis of operating income.
A) Growth, price-recovery and cost leadership components
B) Growth, price-recovery and productivity components
C) Cost leadership, price-recovery and productivity components
D) Growth, cost leadership and productivity components
When analyzing the change in operating income, the strategy component of
price-recovery will increase when:
A) capacity is reduced
B) market share is increased
C) selling prices are increased
D) more units are sold
In a long-run, it is worthwhile to sell a product only if the selling price
exceeds:
A) the total of all the direct costs of the product
B) the total manufacturing costs of the product
C) the total of the fixed costs of the value chain
D) full cost of the product and a markup of an adequate return on capital
A product costs $600 to manufacture and $20 to market and $10 to distribute
(ship to customers.) R&D costs are allocated at $40 per unit. Based on a
targeted rate of return, manager uses a mark-up of 30%. What is the
prospective selling price based on a Cost-Plus pricing approach?
A) $780 B) $806 C) $819 D) $871
Which of the following is the best description of price discrimination?
A) setting different prices for different products
B) charging different prices for quantity amounts
C) using variable costing for some products and full costing for other
products when setting prices
D) charging different prices to different customers or clients for the same
products or services
Which of the following scenarios is an example of predatory pricing?
A) Ceramic Corp sells its products below average total costs during off-peak
seasons.
B) Almeida flowers has arrived at an informal agreement with other sellers in
the area to charge a very high selling price.
C) Anton Inc., sells its products for $25 in the U.S, however it can sell the
same product for double the price in its home country.
D) Duyen Inc., is launching a new product and has decided to sell its product
below its average variable costs until it drives competitors out of market.
Which of the following classifications would the cost of visiting customers
would most likely fit into?
A) customer output unit-level cost
B) customer batch-level cost
C) customer-sustaining cost
D) corporate-sustaining cost
When corporate-sustaining costs are fully allocated to distribution channels,
then the sum of the operating income from each distribution-channel is:
A) equal to company-wide operating income
B) greater than company-wide operating income
C) equal to customer-level operating income
D) greater than customer-level operating income
Which of the following criteria has the presumption that the more-profitable
divisions have a greater ability to absorb corporate administration costs?
A) the fairness or equity criterion
B) the ability to bear criterion
C) the cause-and-effect criterion
D) the benefits-received criterion
The Conity Corporation has an Electric Mixer Division and an Electric Lamp
Division. Of a $17,000,000 bond issuance, the Electric Mixer Division used
$9,300,000 and the Electric Lamp Division used $7,700,000 for expansion.
Interest costs on the bond totaled $1,000,000 for the year. What amount of
interest costs should be allocated to the Electric Lamp Division?
A) $450,000 B) $547,059 C) $646,388 D) $7,700,000
A shift towards a higher proportion of sales of products with a lower
contribution margin per unit will most likely result in a(n):
A) unfavorable sales-mix variance
B) unfavorable sales-quantity variance
C) favorable sales-mix variance
D) favorable sales-quantity variance
Which of the following is an advantage of using practical capacity to allocate
costs?
A) is that it allows a downward supply spiral to develop
B) is that it focuses management's attention on managing unused capacity
C) is that budgets are much easier to develop
D) is that it results in departments bearing a lower percentage of fixed costs
Which of the following is a disadvantage of single-rate method?
A) It is very costly to implement.
B) It may lead operating department managers to make sub-optimal decisions
that are in their own best interest.
C) It does not signal to department managers how variable costs and fixed
costs behave differently.
D) It requires managers to distinguish variable costs from fixed costs, which
is often a challenging task.
Annual total travel expenses to visit two clients (A and B) are $110,000.
Stand-alone weights for cost allocation were determined to be 50% for A and
50% for B however that was based on initial cost estimates and travel
arrangements that were later changed to combine trips and make some
savings ($30,000) possible. If management uses the incremental Shapely
value method, what would be the cost allocation?
A) A = $55,000, B = $55,000
B) A = $55,000, B = $25,000
C) A = $40,000, B = $40,000
D) A = $80,000, B = $30,000
A company produces three products from a joint production process: A, B,
and C. As a percentage of total sales value, a represents 50%, B 49.5%, and C
0.5%. Product C could be considered a:
A) primary product B) main product C) joint product D) byproduct
Which of the following formulas would calculate the net realizable value of a
product?
A) sales value at the split-off point less cost to produce up to the split-off
point
B) sales value × constant gross-margin
C) final sales value minus cost of goods sold
D) final sales value minus separable costs
Bismite Corporation purchases trees from Cheney lumber and processes them
up to the split-off point where two products (paper and pencil casings)
emerge from the process. The products are then sold to an independent
company that markets and distributes them to retail outlets. The following
information was collected for the month of October:
Trees processed: 310 trees
Production: paper 200,000 sheets
pencil casings 200,000
Sales: paper 193,000 at $0.10 per page
pencil casings 197,000 at $0.14 per casing
The cost of purchasing 310 trees and processing them up to the split-off point
to yield 200,000 sheets of paper and 200,000 pencil casings is $13,500.
Bismite's accounting department reported no beginning inventory. If the sales
value at split-off method is used, what are the approximate joint costs
assigned to ending inventory for paper?
A) $196.89 B) $84.38 C) $275.61 D) $204.03
The Berkel Corporation manufactures Widgets, Gizmos, and Turnbols from a
joint process. June production is 7,000 widgets; 10,000 gizmos; and 11,500
turnbols. Respective per unit selling prices at split-off are $115, $85, and $50.
Joint costs up to the split-off point are $188,000. What amount of joint
costs will be allocated to the Turnbols? (Do not round any intermediary
calculations.)
A) $48,475 B) $15,849 C) $71,659 D) $67,865
The drawback of the constant gross-margin percentage NRV method in joint
costing is that it:
A) recognizes that profits are derived from the costs incurred after split-off
B) assumes the profit margin to be identical across all products
C) attempts to approximate the sales values at split-off by subtracting from
final selling prices the separable costs incurred after the split-off point
D) ignores the separable costs of further processing
Which of the following companies is most likely to use process costing?
A) Crimpson Color, a company selling customized garments for niche
customers
B) Effel & Associates, a consulting firm providing various audit and related
services
C) Grimpy Corp., a company manufacturing furniture for customers as per
their requirements
D) Dental Bright Inc., a company manufacturing and selling toothpaste on a
large scale
Charlie Inc., manufactures plastic moldings for car seats. Its costing system
utilizes two cost categories, direct materials and conversion costs. Direct
materials are added at the beginning of production. Conversion costs are
allocated evenly throughout production.
Data for Department A for February 2020 are:
Work in process, beginning inventory, 40% converted 320 units
Units started during February 900 units
Work in process, ending inventory 120 units
How many units were completed and transferred out during February?
A) 440 units B) 900 units C) 1,100 units D) 1,220 units

A) 700 units B) 1,100 units C) 900 units D) 600 units

 Units in beginning work-in-process 3,000
Units started 8,800
Goods completed and transferred out (units) 7,000
Units in ending work-in-process inventory 3,700
Normal spoilage 10%
What is the total spoilage?
A) 7,000 B) 110 C) 880 D) 1,100

WIP, beginning inventory 4/1/2020 94,000 fillets

Direct materials (100% complete)
Conversion costs (50% compete)
Started during April 139,000 fillets
Completed and transferred out 4/30/2020 185,000 fillets
WIP, ending inventory 4/30/2020 29,000 fillets
Direct materials (100% complete)
Conversion costs (20% complete)

WIP, beginning inventory:

Direct materials $135,000
Conversion costs 101,910
Direct materials added 304,000
Conversion costs added 389,130

A)
Work-in-Process Control 468
Materials Control 468
B)
Materials Control 468
Work-in-Process Control 468
C)
Materials Control 1,404
Work-in-Process Control 1,404
D)
Work-in-Process Control 1,404
Materials Control 1,404
Post-investment audits:
A) result in managers to overstate the expected cash inflows from projects
and accept projects they should reject
B) provide management with feedback about the performance of a project
C) include obtaining appropriation requests so that the funding will be
authorized to purchase the equipment
D) are usually not feasible in a large project because the cost accounting
system does not collect actual costs as the initial plans had
Which of the following is true of goal congruence?
A) It exists when the management's strategy is in line with the shareholders'
requirements.
B) It exists when individuals and groups work toward achieving the
organization's goals.
C) It exists when both internal and external stakeholders of an organization
have similar goals.
D) It exists when an organization's goals are in line with the social
acceptability of organizational goals.
Which of the following is an advantage of decentralization?
A) leads to gains from rapid decision making by subunit managers
B) focuses manager's attention on the organization as a whole
C) does not result in a duplication of activities
D) reduces the cost of gathering information
Which of the following is a drawback of decentralizing a multinational
company?
A) It may lead to increased exchange rate risk.
B) It may result in lack of control and results in increasing risk.
C) It creates less responsiveness to the needs of a subunit's customers,
suppliers, and employees.
D) It may lead to an increase in bureaucracy.
A transfer-pricing method leads to goal congruence when:
A) there is a price difference in different markets due to market inefficiencies
B) managers do no act for their own best interest and work for the long-term
best interest of the manager's subunit
C) managers act in their own best interest and the decision is in the long-term
best interest of the company
D) there is a low degree of centralization
Axelia Corporation has two divisions, Refining and Extraction. The
company's primary product is Luboil Oil. Each division's costs are provided
below:
Extraction: Variable costs per barrel of oil=$13
Fixed costs per barrel of oil=$6
Refining: Variable costs per barrel of oil=$26
Fixed costs per barrel of oil=$36
The Refining Division has been operating at a capacity of 40,800 barrels a
day and usually purchases 25,600 barrels of oil from the Extraction Division
and 15,100 barrels from other suppliers at $62 per barrel.
What is the transfer price per barrel from the Extraction Division to the
Refining Division, assuming the method used to place a value on each barrel
of oil is 110% of full costs?
A) $19.00 B) $20.90 C) $55.00 D) $99.00
Axelia Corporation has two divisions, Refining and Extraction. The
company's primary product is Luboil Oil. Each division's costs are provided
below:
Extraction: Variable costs per barrel of oil $15
Fixed costs per barrel of oil $12
Refining: Variable costs per barrel of oil $26
 Fixed costs per barrel of oil $40
The Refining Division has been operating at a capacity of 40,900 barrels a
day and usually purchases 25,300 barrels of oil from the Extraction Division
and 15,300 barrels from other suppliers at $66 per barrel. Assume 300 barrels
are transferred from the Extraction Division to the Refining Division for a
transfer price of $18 per barrel. The Refining Division sells the 300 barrels at
a price of $180 each to customers. What is the operating income of both
divisions together?
A) $10,800 B) $26,100 C) $20,100 D) $48,600
Division A sells ground veal internally to Division B, which in turn, produces
veal burgers that sell for $15 per pound. Division A incurs costs of $3.75 per
pound while Division B incurs additional costs of $7.00 per pound. What is
Division A's operating income per burger, assuming the transfer price of the
ground veal is set at $5.50 per burger?
A) $1.75 B) $0.75 C) $6.50 D) $1.50
A benefit of using a market-based transfer price is that the:
A) profits of the transferring division are sacrificed for the overall good of the
corporation
B) profits of the division receiving the products are sacrificed for the overall
good of the corporation
C) economic viability and profitability of each division can be evaluated
individually
D) transferring division can be assured of recovering its full costs in all
scenarios
Crush Company makes internal transfers at 155% of full cost. The Soda
Refining Division purchases 40,300 containers of carbonated water per day,
on average, from a local supplier, who delivers the water for $58 per
container via an external shipper. To reduce costs, the company located an
independent supplier in Illinois who is willing to sell 40,300 containers at $50
each, delivered to Crush Company's Shipping Division in Missouri. The
company's Shipping Division in Missouri has excess capacity and can ship
the 40,300 containers at a variable cost of $5.00 per container. What is the
total cost of purchasing the water from the Illinois supplier and shipping it to
the Soda Division?
A) $2,015,000 B) $2,216,500 C) $2,337,400 D) $201,500
In comparing the three basic approaches to transfer pricing, which of the
following statements would be true?
A) A cost-based approach preserves subunit autonomy while negotiated
transfer prices do not.
B) Market-based transfer pricing motivates managers but negotiated prices do
not.
C) Cost-based transfer pricing systems are more difficult to implement and
often make more time to implement than negotiated transfer pricing.
D) Market-based transfer pricing achieves goal congruence when markets are
competitive while cost-based can achieve goal congruence, but not always.
Which of the following steps in designing an accounting-based performance
measure includes decisions such as defining assets as total assets or net assets
in the calculation of return on assets?
A) choosing performance measures that align with top management's
financial goals
B) choosing the time horizon of each performance measure
C) choosing the details for each performance measure
D) choosing a target level of performance
Using residual income as a measure of performance rather than return on
investment promotes goal congruence because residual income:
A) places importance on the reduction of underperforming assets
B) calculates a percentage return rather than an absolute return
C) concentrates on maximizing an absolute amount of dollars
D) concentrates on maximizing the return on sales
Care Inc., has two divisions that operate independently of one another. The
financial data for the year 2020 reported the following results:
North South
Sales $6,000,000 $5,000,000
Operating income 1,600,000 1,500,000
Taxable income 1,400,000 700,000
Investment 15,000,000 12,000,000
The company's desired rate of return is 10%. Income is defined as operating
income. Which division has the best return on investment and which division
has the best residual income figure, respectively?
A) North, North B) South, South C) North, South
A company has operating income of $300,000, revenues of $1,500,000, total
assets of $2,000,000 and an ROI of 15%. To improve the ROI, to increase
ROI to 20%, which of the following investment turnovers would need to be
achieved?
A) .75 B) 1.5 C) 1 D) 2
Springfield Corporation, whose tax rate is 35%, has two sources of funds:
long-term debt with a market value of $8,100,000 and an interest rate of 9%,
and equity capital with a market value of $14,000,000 and a cost of equity of
12%. Springfield has two operating divisions, the Blue division and the Gold
division, with the following financial measures for the current year:
Total Assets Current Liabilities Operating Income
Blue Div. $9,700,000 $3,000,000 $1,058,000
Gold Div. $11,000,000 $2,200,000 $1,200,000
What is Economic Value Added (EVA®) for the Blue Division?
A) ($34,450) B) $34,450 C) $404,750 D) ($258,050)
Inflation clouds the real economic returns on an asset and:
A) makes variable-cost-based ROI higher
B) makes historical-cost-based ROI lower.
C) makes historical-cost-based ROI higher
D) makes variable-cost-based ROI lower
Ventaz Corp. purchased assets for its overseas branch for $16,000. The rate
of conversion at the time of purchase of asset was $1.400 / Euro. If the
company evaluates a project's ROI based on its initial costs and its operating
income and does that in the foreign currency, what value of assets in Euros to
be used to calculate the ROI if the rate current conversion rate is $1.513 /
Euro and the average rate being $1.409 / Euro?
A) 11,429 Euros B) 10,575 Euros C) 11,356 Euros D) 22,400 Euros
Which of the following is true of rewarding managers on the basis of residual
income?
A) Managers are paid a fixed amount for his services regardless of the risk
involved.
B) Managers' efforts are easily measured.
C) Managers taking less risk should be rewarded more since more risk can
lead to huge losses.
D) Managers' rewards are dependent on their own efforts and other local
economic factors.