Chapter 2: An Introduction to Cost Terms and Purposes
Q1) Work-in-process inventory would normally include ________.
A) direct materials in stock and awaiting use in the manufacturing process
B) goods partially worked on but not yet fully completed
C) goods fully completed but not yet sold
D) goods returned after being sold to be re-worked on further improvements and quality
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Q2) Work-in-process inventory would normally include ________.
A) direct materials in stock and awaiting use in the manufacturing process
B) goods partially worked on but not yet fully completed
C) goods fully completed but not yet sold
D) goods returned after being sold to be re-worked on further improvements and quality
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Q3) Which of the following is a fixed cost with respect to units produced in a factory?
A) monthly rent payment for the building
B) electricity expenses
C) utilities cost of the building
D) direct material costs
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Chapter 3: Cost-Volume-Profit Analysis
Q1) Tony Manufacturing produces a single product that sells for $100. Variable costs per
unit equal $45. The company expects total fixed costs to be $78,000 for the next month
at the projected sales level of 3,000 units. In an attempt to improve performance,
management is considering a number of alternative actions. Each situation is to be
evaluated separately. Suppose management believes that a $85,000 increase in the
monthly advertising expense will result in a considerable increase in sales. Sales must
increase by ________ to justify this additional expenditure?
A) 850 units
B) 1,546 units
C) 1,412 units
D) 1,419 units
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Q2) James Corporation gathered the following information:
Required:
[Link] the fixed costs, assuming breakeven revenue is $2,000,000.
[Link] sales volume in dollars to produce an after-tax net income of $150,000.
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Chapter 11: Decision Making and Relevant Information
Q1) When deciding to lease a new cutting machine or continue using the old machine,
the irrelevant cost is ________.
A) $50,000, cost of the old machine
B) $20,000, cost of the new machine
C) $10,000, selling price of the old machine
D) $3,000, annual savings in operating costs if the new machine is purchased
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Q2) When deciding to lease a new cutting machine or continue using the old machine,
the irrelevant cost is ________.
A) $50,000, cost of the old machine
B) $20,000, cost of the new machine
C) $10,000, selling price of the old machine
D) $3,000, annual savings in operating costs if the new machine is purchased
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Q3) For short-run product-mix decisions, maximizing contribution margin will also result
in maximizing operating income.
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Chapter 20: Inventory Management, Just-in-Time, and
Simplified Costing Methods
Q1) Tornado Electronics manufactures stereos. All processing is initiated when an order is
received. For April there were no beginning inventories. Conversion Costs and Direct
Materials are the only manufacturing cost accounts. Direct Materials are purchased
under a just-in-time system. Backflush costing is used with a finished goods trigger
point. Additional information is as follows:
Required:
Record all journal entries for the monthly activities related to the above transactions if
backflush costing is used.
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Chapter 4: Job Costing
Q1) Process costing ________.
A) allocates all product costs, including materials, and labor
B) results in different costs for different units produced
C) is commonly used by general contractors who construct custom-built homes
D) is used exclusively in manufacturing
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Q2) When using a normal costing system, manufacturing overhead is allocated using
the ________ manufacturing overhead rate and the ________ quantity of the
allocation base.
A) budgeted; actual
B) budgeted; budgeted
C) actual; budgeted
D) actual; actual
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Q3) Under the proration approach, the sum of the amounts shown in the subsidiary
ledgers will not match the amounts shown in the general ledger because no
adjustments from budgeted to actual manufacturing overhead rates are made in the
individual job-cost records.
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Chapter 22: Management Control Systems, Transfer
Pricing, and Multinational Considerations
Q1) The transfer price creates revenues for the selling subunit and costs for the buying
subunit affecting each subunit's operating income.
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Q2) The choice of a transfer-pricing method has minimal effect on the allocation of
company-wide operating income among divisions.
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Q3) Which of the following is true of transfer pricing?
A) It creates costs for the selling subunit.
B) It creates revenues for the buying subunit.
C) It helps top managers evaluate the performance of individual subunits.
D) It makes managers' information-processing and decision-making tasks difficult.
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Chapter 16: Cost Allocation: Joint Products and Byproducts
Q1) Separable costs include manufacturing costs only.
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Q2) Which of the following would not be a GAAP or managerial accounting reason for
allocating joint costs?
A) to calculate cost of goods sold
B) to analyze the profitability of various products
C) for reimbursement of costs under a federal contract
D) to evaluate the performance of division managers
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Q3) Which of the following statements is true of the methods for allocating joint costs?
A) Constant gross-margin percentage method results in same joint production cost per
unit for all products.
B) Estimated net realizable value method results in same gross margin percentage for
all products.
C) Present value allocation method is the least preferred method due to its complex
calculations.
D) Sales value at split-off method uses the sales value of the entire production of the
accounting period to allocate costs.
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Chapter 19: Balanced Scorecard: Quality and Time
Q1) Spoilage, rework, scrap, and machine repairs are all examples of ________.
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs
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Q2) Manufacturing Cycle Efficiency (MCE) = Value-added Manufacturing Time divided
by Manufacturing Cycle Time.
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Q3) Discuss the means by which a company goes about evaluating and installing a new
quality improvement program.
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Chapter 15: Allocation of Support-Department Costs,
Common Costs, and Revenues
Q1) Under which allocation method are one-way reciprocal support services recognized?
A) direct method
B) artificial cost method
C) reciprocal method
D) step-down method
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Q2) If management wants to choose a method of revenue allocation that best captures
the "benefits received" by customers then they would use ________ to allocate
revenue to products in a bundle.
A) stand-alone revenue -allocation based on unit costs
B) stand-alone revenue-allocation based on selling prices
C) stand-alone revenue-allocation based on physical units
D) stand-alone revenue-allocation based on unit costs
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Q3) The direct allocation method provides key information for outsourcing decisions
regarding support services.
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Chapter 7: Flexible Budgets, Direct-Cost Variances, and
Management Control
Q1) A standard is attainable through efficient operations but allows for normal
disruptions such as machine breakdowns and defective production.
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Q2) Fine Lumber Inc. mills and finishes furniture kits. A certain kit requires the following:
Direct materials standard2 square yards at $13.50 per yard
Direct manufacturing labor standard1.5 hours at $20.00 per hour
During the third quarter, the company made 1,500 kits and used 3,150 square yards of
wood costing $42,600. Direct labor totaled 2,100 hours for $46,150.
Required:
[Link] the direct materials price and efficiency variances for the quarter.
[Link] the direct manufacturing labor price and efficiency variances for the quarter.
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Q3) If variance analysis is used for performance evaluation, managers are encouraged
to meet targets using creativity and resourcefulness.
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Chapter 5: Activity-Based Costing and Activity-Based
Management
Q1) Xylon Corp. has contracts to complete weekly supplements required by forty-six
customers. For the year 2018, manufacturing overhead cost estimates total $900,000 for
an annual production capacity of 10 million pages.
For 2018, Xylon decided to evaluate the use of additional cost pools. After analyzing
manufacturing overhead costs, it was determined that number of design changes,
setups, and inspections are the primary manufacturing overhead cost drivers. The
following information was gathered during the analysis:
During 2018, two customers, Money Managers and Hospital Systems, are expected to use
the following printing services:
If manufacturing overhead costs are considered one large cost pool and are assigned
based on 10 million pages of production capacity, what is the cost driver rate? (Round
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the final answer to three decimal places.)
A) $0.078 per page
B) $0.035 per page
C) $0.055 per page
D) $0.09 per page
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Chapter 8: Flexible Budgets, Overhead Cost Variances, and
Management Control
Q1) Davidson Corporation manufactured 53,400 units during September. The following
fixed overhead data relates to September:
What is the fixed overhead spending variance?
A) $1,056 unfavorable
B) $400 favorable
C) $400 unfavorable
D) $1,056 favorable
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Chapter 21: Capital Budgeting and Cost Analysis
Q1) List the capital budgeting methods used to analyze financial information.
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Q2) The nominal rate of return is made up of a risk-free element when there is no
expected inflation, a business-risk element, and an inflation element.
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Q3) Accrual accounting rate of return is calculated by dividing increase in expected
average annual after-tax operating income by the net initial investment.
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