1. Costs that do not increase or decrease due to a special order are never considered incremental costs for the special order decision. (Points: 5)
2. Cost of Goods Sold appears on the balance sheet. (Points: 5)
3. One goal of just-in-time systems is to minimize inventory levels. (Points: 5)
4. Shula’s 347 Grill has budgeted the following costs for a month in which 1,600 steak dinners will be produced and sold: Materials, $4,080; hourly labor (variable), $5,200; rent (fixed), $1,700; depreciation, $800; and other fixed costs, $600. Each steak dinner sells for $14.00 each. How much would Shula’s profit increase if 10 more dinners were sold?
5. Supply Chain Management Systems (SCM): (Points: 5)
computerize inventory control and production planning
organize activities between a company and its suppliers
automate customer service and support.
allow customers to track their purchase as it is being produced.
6. The Institute of Management Accountants (IMA) (Points: 5)
is the professional organization of managerial accountants.
administers the comprehensive examination which must be passed before a person can become a CMA.
has developed a set of standards of ethical conduct and maintains an ethics hotline
All of the above statements are true.
7. Deere Farm Products applies overhead using a predetermined overhead rate. Overhead is applied based on direct labor hours. At the beginning of the year it is estimated that $500,000 in overhead will be incurred and 25,000 hours will be worked. At year end, 24,000 hours were actually worked, and actual overhead costs were $470,000. What can be concluded from this? (Points: 5)
Cost control was good.
Overhead is overapplied by $10,000
Overhead is underapplied by $10,000
Overhead is applied at a rate of $19.58 per hour
8. Just-in-time (JIT) systems were first used in (Points: 5)
the United States.
9. The goal of minimizing raw materials and work in process inventories is most closely associated with (Points: 5)
computer-controlled manufacturing systems.
10. Which of the following is not a component of a total quality management (TQM) program? (Points: 5)
Making products right the first time, thus reducing rework and scrap costs
Listening to the customers’ needs
Encouraging workers to continuously improve the production process
Eliminating manufacturing overhead
11. When partially completed units are converted to a comparable number of completed units, they are referred to as (Points: 5)
12. For each period, the total cost that must be accounted for is the sum of (Points: 5)
costs in the beginning Work in Process inventory and costs in the ending Work in Process inventory.
all costs that were incurred during this period.
costs in the beginning Work in Process inventory and costs incurred during the period.
costs transferred out of the department and costs in the beginning Work in Process inventory.
13. The work in process inventory decreased from 1,832 units to 1,275 units during the month. If 8,653 units were started during the month, how many units were transferred out of the department? (Points: 5)
14. In the cutting department, all the materials are added at the beginning of the process and conversion costs are added evenly during the processing. During the first month of operations, the cutting department transferred 50,000 units to the sewing department. Ending inventory consisted of 2,800 units which were 35% complete with respect to conversion costs. What are the equivalent units for materials and for conversion costs, respectively? (Points: 5)
50,000 and 50,980
52,800 and 50,980
52,800 and 52,800
50,000 and 52,800
15. Ranger Glass Company manufactures glass for French doors. At the start of May, 2,000 units were in-process. During May, 11,000 units were completed and 3,000 units were in process at the end of May. These in-process units were 90% complete with respect to material and 50% complete with respect to conversion costs. Other information is as follows:
How much is the cost per equivalent unit for direct materials?
16. The account analysis method is subjective in that different managers viewing the same set of facts may reach different conclusions regarding which costs are fixed and which costs are variable. (Points: 5)
17. Income statements of manufacturing firms prepared for external purposes use variable costing. (Points: 5)
18. Variable costing facilitates C-V-P analysis. (Points: 5)
19. Within the relevant range, variable costs (Points: 5)
are a different amount per unit at different activity levels.
are the same total amount at different activity levels.
are the same amount per unit at any activity level.
none of the above.
20. Step costs (Points: 5)
are the same amount per unit for each range of volume.
are fixed for a range of volume but increase to a higher level when the upper bound of the range is exceeded.
are a different total amount at every level of activity.
contain both a variable cost element and a fixed cost element
21. In variable costing, when does fixed manufacturing overhead become an expense? (Points: 5)
In the period when the product is sold.
In the period when the expense is incurred.
In the period when other expenses are at the lowest level.
22. Which method will encourage managers to produce more units in order to increase income for performance evaluations? (Points: 5)
23. If a company employs JIT inventory techniques, which statement is true? (Points: 5)
Variable and full costing income will differ little since there is almost no inventory.
Variable and full costing income will differ little since there is almost no fixed cost.
Variable and full costing income will differ greatly little since there is much inventory.
Variable and full costing income will differ greatly since there are high levels of fixed costs.
24. Bjorni Inc. makes a single product, the Bjorn. Information for 2010 appears below:
Will income be higher under variable or full costing?
They will be the same.
Cannot be determined.
25. Bjorni Inc. makes a single product, the Bjorn. Information for 2010 appears below:
How much is the profit for the year under variable costing?
26. When service departments costs are allocated using actual costs and actual usage, the charge one operating manager receives will depend on the usage of other managers. (Points: 5)
27. Managers should not be held responsible for controllable costs. (Points: 5)
28. Indirect costs occur when (Points: 5)
resources are shared by more than one product or service.
costs cannot be directly traced to products or services.
multiple departments share a piece of equipment.
All of the above are correct.
29. Which of the following is likely to occur when more overhead cost pools are used? (Points: 5)
Product costs will be more accurate.
Recordkeeping will be more expensive.
Decisions such as product pricing will be improved.
All of the above are true.
30. Mementos Gift Shop produces vases. Utility costs are allocated to products based on the amount of time spent on the pottery wheel. Utility costs of $3,000 per month are budgeted and the store anticipates spending 7,500 minutes on the pottery wheel each month. If a vase uses 18 minutes on the pottery wheel how much of the utility costs will be allocated to each vase? (Points: 5)
31. Fixed costs that are avoidable are incremental costs in a make or buy decision. (Points: 5)
32. The proper way to analyze the decision to drop a product line is to compare sunk costs to incremental costs. (Points: 5)
33. Improving performance in areas which are not bottlenecks will not improve overall output. (Points: 5)
34. The value of benefits foregone by selecting one decision alternative over another is a(n)
35. A disadvantage of using an outside supplier is that (Points: 5)
they may be able to produce a component at a lower cost.
there is a loss of control over the production process.
there may be an opportunity to expand other parts of the company.
the supplier assumes some of the risk of a downturn in business activity.
36. The Diamond Oaks Company is deciding whether to purchase a machine for $80,000 which will yield the following cost savings:
Year 1 $25,000
Year 2 $40,000
Year 3 $45,000
The expected rate of return on this project is closest to:
37. How much will you need to invest today at 10% to have $10,000 six years from today? (Points: 5)
38. An investment of $100,000 promises returns of $40,000 per year for each of the next three years. If taxes are ignored and the required rate of return is 14%, what is the net present value of the project? (Points: 5)
39. An investment of $36,510 promises to return $8,000 each year for the next 7 years. If taxes are ignored, what is the internal rate of return? (Points: 5)
less than 9%
More than 14%
40. An investment of $700,000 is expected to generate the following cash flows:
Year 1 $200,000
Year 2 $200,000
Year 3 $100,000
Year 4 $200,000
Year 5 $100,000
What is the investment’s payback period?
41. When the same budget is used for planning and control, managers may be tempted to build slack into their budgets. (Points: 5)
42. The amount and timing of cash flows is the focus of the cash receipts and disbursements budget. (Points: 5)
43. Differences between standard and actual costs are referred to as standard cost variances. (Points: 5)
44. Alpha Caps Company has budgeted production of 4,000 units in January. Each unit requires 1.5 hours of labor. The standard labor rate is $8.00 per hour. How much are total budgeted direct labor costs for January? (Points: 5)
45. The amount of direct material that must be purchased during a period depends on the amount of direct material (Points: 5)
needed for production.
available in the beginning inventory.
desired as ending inventory.
All of the above are correct.
46. The person evaluating a manager should consider (Points: 5)
any deviation from budgeted amounts as an item that should be investigated.
all favorable variances as indications of good performance.
that managers will focus their attention on those measures that they know will be part of their evaluation.
All of the above are true.
47. In general, unfavorable material variances arise from (Points: 5)
using more material than planned.
paying a higher price than planned.
Both A and B are correct.
None of the above is correct.
48. If the actual price per unit of material is greater than the standard price, the material price variance will be (Points: 5)
49. Volume variance occurs because: (Points: 5)
cost control is poor.
the estimated activity level is wrong.
Both A and B.
Neither A nor B.
50. Which of the following is likely to produce a need for temporary financing to bridge a cash shortfall? (Points: 5)
Building up inventory in anticipation of increased sales in the months ahead.
Allowing customers to purchase on credit.
Paying insurance policies in advance of the period insured.
All of the above.
51. The four dimensions of performance which are considered in a balanced scorecard are financial, customer, internal process, and innovation. (Points: 5)
52. The advantage of using a negotiated transfer price instead of a cost-based transfer price is that: (Points: 5)
managers should be able to consider opportunity costs in a negotiated price.
a negotiated transfer price provides managers greater autonomy than a cost-based transfer price.
a negotiated transfer price will get a good result if managers act rationally.
All of the above.
53. Return on investment can be improved by (Points: 5)
increasing the profit margin.
generating more sales for each dollar invested.
Both A and B are correct.
Neither A nor B is correct.
54. Which of the following is not a disadvantage of a decentralized organization? (Points: 5)
Managers’ goals may not be the same as the goals of the company as a whole.
Some activities may be duplicated and incur unnecessary costs.
Managers with the best information make the appropriate decisions.
All of the above are disadvantages of a decentralized organization.
55. Kendrick Company reported the following results for August 2011:
Given this information, how much is the company’s invested capital?