C. . %.
,.
I7<<<. I0<<<<. some other amount.
Answer( A )*( &'pe( A Which of the following statements is 8are9 correct? A. *$ertime premiums should be treated as a component of manufacturing o$erhead. B. *$ertime premiums should be treated as a component of direct labor. C. !dle time should be treated as a component of direct labor. . !dle time should be accounted for as a special t'pe of loss. %. Both "B" and "C" are correct.
,:.
Answer( % )*( 2 &'pe( +C <.
Answer( A )*( &'pe( +C ,0.
Con$ersion costs are( A. direct material direct labor and manufacturing o$erhead. B. direct material and direct labor. C. direct labor and manufacturing o$erhead. . p ri me co st s. %. p er io d c os ts .
=ort Walton !ndustries began Eul' with a finished-goods in$entor' of I07<<<. &he finishedgoods in$entor' at the end of Eul' was I01<<< and the cost of goods sold during the month was I1,<<<. &he cost of goods manufactured during Eul' was( A. I44<<<. B. I70<<<. C. I117<<<. . I1,<<<. %. some other amount. Answer( C )*( 2 &'pe( A
1. Answer( C )*( &'pe( +C ,.
Wor#-in-process in$entor' is composed of( A. direct material and direct labor. B. direct labor and manufacturing o$erhead. C. direct material and manufacturing o$erhead. . direct material onl'. %. direct material direct labor and manufacturing o$erhead.
/rime costs are comprised of( A. direct materials and manufacturing o$erhead. B. direct labor and manufacturing o$erhead. C. direct materials direct labor and manufacturing o$erhead. . direct materials and direct labor. %. direct materials and indirect materials.
ansas /lating Compan' reported a cost of goods manufactured of I,2<<<< with the firm6s 'ear-end balance sheet re$ealing wor# in process and finished goods of I<<< and I24<<< respecti$el'. !f supplemental information disclosed raw materials used in production of I0<<<< direct labor of I4<<<< and manufacturing o$erhead of I1,<<<< the compan'6s beginning wor# in process must ha$e been( A. I<<<. B. I4<<<. C. I2<<<. . I:4<<<. %. some other amount.
Answer( )*( &'pe( +C ,2.
Which of the following statements is true? A. /roduct costs affect onl' the balance sheet. B. /roduct costs affect onl' the income statement. C. /eriod costs affect onl' the balance sheet. . /eriod costs affect both the balance sheet and the income statement. %. /roduct costs e$entuall' affect both the balance sheet and the income statement.
,.
+aw materials used irect labor Manufacturing o$erhead Wor#-in-process in$entor' 1>1 =inished-goods in$entor' 1>1 Wor#-in-process in$entor' 1,>1 =inished-goods in$entor' 1,>1
Answer( % )*( 2 &'pe( 3 ,4.
,7.
!n a manufacturing compan' the cost of goods completed during the period would include which of the following elements? A. +aw materials used. B. Beginning finished goods in$entor'. C. Mar#eting costs. . epreciation of deli$er' truc#s. %. More than one of the abo$e. Answer( A )*( 2 &'pe( +C Which of the following e;uations is used to calculate cost of goods sold during the period? A. Beginning finished goods K cost of goods manufactured K ending finished goods. B. Beginning finished goods - ending finished goods. C. Beginning finished goods K cost of goods manufactured. . Beginning finished goods K cost of goods manufactured - ending finished goods. %. Beginning finished goods K ending finished goods - cost of goods manufactured. Answer( )*( 2 &'pe( +C
Answer( C )*( 2 &'pe( A &he accounting records of Bronco Compan' re$ealed the following information( I 2<<<< 1,<<< 2<<<< <<<< 17:<<< 42<<< 10<<<<
Bronco6s cost of goods manufactured is( A. I1:<<<. B. I,,<<<. C. I27<<<. . I41<<<. %. some other amount. Answer ( A )*( 2 &'pe( A .
&he accounting records of olphin Compan' re$ealed the following information( &otal manufacturing costs Wor#-in-process in$entor' Ean. 1 Wor#-in-process in$entor' ec. 1 =inished-goods in$entor' Ean. 1 =inished-goods in$entor' ec. 1
I<<<< 2<<< 47<<< 102<<< 1,<<<
olphin6s cost of goods sold is( A. I<7<<<. B. I,:<<<. C. I1<<<. . I<<<. %. some other amount. Answer( C )*( 2 &'pe( A 0.
=or the 'ear 5ust ended Cole Corporation6s manufacturing costs 8raw materials used direct labor and manufacturing o$erhead9 totaled I1<<<<<. Beginning and ending wor#-in-process in$entories were I2<<<< and I:<<<< respecti$el'. Cole6s balance sheet also re$ealed respecti$e beginning and ending finished-goods in$entories of I,<<<< and I17<<<<. *n the basis of this information how much would the compan' report as cost of goods manufactured 8CM9 and cost of goods sold 8C@9? A. CM I10<<<
7.
:.
)eggio !ndustries reported the following data for the 'ear 5ust ended( sales re$enue I:<<<
0<.
/ump#in %nterprises began operations on Eanuar' 1 ,<1 with all of its acti$ities conducted from a single facilit'. &he compan'6s accountant concluded that the 'ear6s building depreciation should be allocated as follows( selling acti$ities ,
01.
An emplo'ee accidentall' o$erstated the 'ear6s ad$ertising epense b' I<<<<. Which of the following correctl' depicts the effect of this error? A. Cost of goods manufactured will be o$erstated b' I<<<<. B. Cost of goods sold will be o$erstated b' I<<<<. C. Both cost of goods manufactured and cost of goods sold will be o$erstated b' I<<<<. . Cost of goods sold will be o$erstated b' I<<<< and cost of goods manufactured will be understated b' I<<<<. %. 3one of the abo$e. Answer( % )*( 2 &'pe( A
As acti$it' decreases unit $ariable cost( A. increases proportionatel' with acti$it'. B. decreases proportionatel' with acti$it'. C. remains constant. . increases b' a fied amount. %. decreases b' a fied amount. Answer( C )*( 7 &'pe( +C
0,.
Which of the following is not an eample of a $ariable cost? A. @traight-line depreciation on a machine that has a fi$e-'ear ser$ice life. B. Wages of manufacturing wor#ers whose pa' is based on hours wor#ed. C. &ires used in the production of tractors. . Aluminum used to ma#e patio furniture. %. Commissions paid to sales personnel. Answer( A )*( 7 &'pe( 3
0.
Answer( )*( 2 &'pe( A 4.
ariable costs are those costs that( A. $ar' in$ersel' with changes in acti$it'. B. $ar' directl' with changes in acti$it'. C. remain constant as acti$it' changes. . decrease on a per-unit basis as acti$it' increases. %. increase on a per-unit basis as acti$it' increases. Answer( B )*( 7 &'pe( +C
Answer( )*( 2 &'pe( A 2.
Answer( % )*( 4 &'pe( 3 &he choices below depict fi$e costs of Benton Corporation and a possible dri$er for each cost. Which of these choices li#el' contains an inappropriate cost dri$er? A. asoline consumedH number of miles dri$en. B. Manufacturing o$erhead incurred in a hea$il' automated facilit'H direct labor hours. C. @ales commissionsH gross sales re$enue. . Building maintenance costH building s;uare footage. %. /ersonnel department costH number of emplo'ees. Answer( B )*( 4 &'pe( 3
Answer( B )*( 2 &'pe( A .
Which of the following would li#el' be a cost dri$er for the amount of direct materials used? A. &he number of units sold. B. &he number of direct labor hours wor#ed. C. &he number of machine hours wor#ed. . &he number of emplo'ees wor#ing in the factor'. %. &he number of units produced.
00.
=ied costs are those costs that( A. $ar' directl' with changes in acti$it'. B. $ar' in$ersel' with changes in acti$it'. C. remain constant on a per-unit basis. . increase on a per-unit basis as acti$it' increases. %. remain constant as acti$it' changes. Answer( % )*( 7 &'pe( +C &he fied cost per unit( A. will increase as acti$it' increases. B. will increase as acti$it' decreases. C. will decrease as acti$it' increases. . will remain constant.
%.
will ehibit the beha$ior described in choices "B" and "C." Answer( % )*( : &'pe( 3
Answer( % )*( 7 &'pe( 3 1. 0.
Which of the following is an eample of a fied cost? A. /aper used in the manufacture of tetboo#s. B. /ropert' taes paid b' a firm to the Cit' of )os Angeles. C. &he wages of part-time wor#ers who are paid I7 per hour. . asoline consumed b' salespersons6 cars. %. @urgical supplies used in a hospital6s operating room.
Costs that can be easil' traced to a specific department are called( A . d ir ec t co sts . B. indirect costs. C. product costs. . manufacturing costs. %. processing costs. Answer ( A )*( : &'pe( +C
Answer( B )*( 7 &'pe( 3 ,. 02.
&he $ariable costs per unit are I0 when a compan' produces 1<<<< units of product. What are the $ariable costs per unit when 7<<< units are produced? A. I0.<<. B. I0.<. C. I.<<. . I.<. %. @ome other amount.
Which of the following would not be considered a direct cost with respect to the ser$ice department of a new car dealership? A. Wages of repair techni;ues. B. /ropert' taes paid b' the dealership. C. +epair parts consumed. . @alar' of the department manager. %. epreciation on new e;uipment used to anal'ze engine problems. Answer( B )*( : &'pe( 3
Answer( A )*( 7 &'pe( A . 04.
&he fied costs per unit are I1< when a compan' produces 1<<<< units of product. What are the fied costs per unit when 1,<< units are produced? A. I0. B. I2. C. I7. . I1<. %. @ome other amount. Answer( C )*( 7 &'pe( A
07.
0.
&otal costs are I1,<<<< when 1<<<< units are producedH of this amount $ariable costs are I07<<<. What are the total costs when 1,<<< units are produced? A. I42<<. B. I4,<<<. C. I1,<<<<. . I1,:2<<. %. I100<<<.
0:.
Which of the following would not be characterized as a cost ob5ect? A. An automobile manufactured b' eneral Motors. B. &he 3ew or# =ire epartment. C. A Burger ing restaurant located in Cle$eland *hio. . A elta Airlines flight from Atlanta to Miami. %. All of the abo$e are eamples of cost ob5ects.
&he tuition that will be paid net semester b' a college student who pursues a degree is a8n9( A. sun# cost. B. out-of-poc#et cost. C. indirect cost. . a $e ra ge c ost . %. ma rg in al c ost . Answer( B )*( 1< &'pe( 3
2.
Answer( )*( 7 &'pe( A <.
Answer( B )*( : &'pe( +C 3 &he salar' that is sacrificed b' a college student who pursues a degree full time is a8n9( A. sun# cost. B. out-of-poc#et cost. C. opportunit' cost. . differential cost. %. ma rg in al c ost . Answer( C )*( 1< &'pe( 3
. Answer( )*( 7 &'pe( A Bater Compan' which pa's a 1
!ndirect costs( A. can be traced to a cost ob5ect. B. cannot be traced to a particular cost ob5ect. C. are not important. . are alwa's $ariable costs. %. ma' be indirect with respect to isne' World but direct with respect to one its ma5or components %pcot Center.
Which of the following costs should be ignored when choosing among alternati$es? A. *pportunit' costs. B. @un# costs. C. *ut-of-poc#et costs. . ifferential costs. %. 3one of the abo$e. Answer( B )*( 1< &'pe( +C
4.
!f the total cost of alternati$e A is I<<<< and the total cost of alternati$e B is I0<<< then
I12<<< is termed the( A. opportunit' cost. B. a $e ra ge co st. C. sun# cost. . out-of-poc#et cost. %. differential cost.
C. . %.
Answer( C )*( 1 &'pe( +C
Answer( % )*( 1< &'pe( 3 se the following to answer ;uestions 7-:( Wee Care is a nurser' school for pre-#indergarten children. &he school has determined that the following biwee#l' re$enues and costs occur at different le$els of enrollment( 3umber of @tudents %nrolled 1< 1 12 ,< ,1 7.
&otal +e$enue I<<< 0<< 07<< 2<<< 2<<
&otal Costs $2,100 2,700 2,800 3,200 3,255
&he marginal cost when the twent'-first student enrolls in the school is( A. I. B. I1. C. I<<. . I<0. %. I,. Answer( A )*( 1< &'pe( A
:.
cost beha$ior. cost anal'sis. cost approimation.
&he a$erage cost per student when 12 students enroll in the school is( A. I1<<. B. I1,. C. I14. . I<<. %. I0<<.
,. Which of the following costs changes in direct proportion to a change in the acti$it' le$el? A. ariable cost. B . =i e d co st . C. @emi$ariable cost. . @tep-$ariable cost. %. @tep-fied cost. Answer( A )*( , &'pe( +C . Montgomer' Compan' has a $ariable selling cost. !f sales $olume increases how will the total $ariable cost and the $ariable cost per unit beha$e? &otal ari able Cost ari able Cost /er nit A. !ncrease !ncrease B. !ncrease +emain constant C. !ncrease ecrease . +emain constant ecrease %. ecrease !ncrease Answer( B )*( , &'pe( +C 0. What t'pe of cost ehibits the beha$ior that follows? Manufacturing olume 8nits9 <<<< 4<<<<
Cost /er nit I1.: 1.:
Answer( C )*( 1< &'pe( A 2<.
&he costs that follow all ha$e applicabilit' for a manufacturing enterprise. Which of the choices listed correctl' denotes the costsG applicabilit' for a ser$ice pro$ider? /eriod Cost ncontrollable Cost *pportunit' Cost Applicable Applicable 3ot applicable Applicable 3ot applicable Applicable Applicable Applicable Applicable 3ot applicable Applicable Applicable 3ot applicable Applicable 3ot applicable Answer( C )*( 1< &'pe( +C
MULTIPLE CHOICE QUESTIONS
1. &he relationship between cost and acti$it' is termed( A. cost estimation. B. cost prediction.
A. B. C. . %.
ariable cost. =i e d co st . @emi$ariable cost. iscretionar' fied cost. @tep-fied cost.
Answer( A )*( , &'pe( 3 . /laza Corporation obser$ed that when ,<<< units were sold a particular cost amounted to I4<<<< or I,.7< per unit. When $olume increased b' 1L the cost totaled I7<<< 8i.e. I,.7< per unit9. &he cost that /laza is stud'ing can best be described as a( A. $ariable cost. B . fied cost. C. semi$ariable cost. . discretionar' fied cost. %. step-fied cost. Answer( A )*( , &'pe( 3
2. A compan' obser$ed a decrease in the cost per unit. All other things being e;ual which of the following is probabl' true? A. &he compan' is stud'ing a $ariable cost and total $olume has increased. B. &he compan' is stud'ing a $ariable cost and total $olume has decreased. C. &he compan' is stud'ing a fied cost and total $olume has increased. . &he compan' is stud'ing a fied cost and total $olume has decreased. %. &he compan' is stud'ing a fied cost and total $olume has remained constant. Answer( C )*( , &'pe( 3 4.
Webster has the following budgeted costs at its anticipated production le$el 8epressed in hours9( $ariable o$erhead I1<<<
C. . %.
As a horizontal line. As a $ertical line. As a cur$ilinear line.
Answer( C )*( , &'pe( 3 11. When graphed a t'pical fied cost appears as( A. a horizontal line. B. a $ertical line. C. a u-shaped line. . a diagonal line that slopes downward to the right. %. a diagonal line that slopes upward to the right. Answer( A )*( , &'pe( +C 1,.
Costs that remain the same o$er a wide range of acti$it' but 5ump to a different amount outside that range are termed( A. step-fied costs. B. step-$ariable costs. C. semi$ariable costs. . cur$ilinear costs. % . m i ed cos ts .
Answer( B )*( , &'pe( 3 Answer( A )*( , &'pe( +C 7. What t'pe of cost ehibits the beha$ior that follows? Manufacturing olume 8nits9 <<<< 7<<<< A. B. C. . %.
&otal Cost I1<<<< 1<<<<
Cost /er nit I.<< 1.77
ariable cost. = i ed c os t. @emi$ariable cost. @tep-$ariable cost. M i ed c os t.
Answer( B )*( , &'pe( 3 :. When graphed a t'pical $ariable cost appears as( A. a horizontal line. B. a $ertical line. C. a u-shaped line. . a diagonal line that slopes downward to the right. %. a diagonal line that slopes upward to the right. Answer( % )*( , &'pe( +C 1<. 3orman Compan' pa's a sales commission of L on each unit sold. !f a graph is prepared with the $ertical ais representing per-unit cost and the horizontal ais representing units sold how would a li ne that depicts sales commissions be drawn? A. As a straight diagonal line sloping upward to the right. B. As a straight diagonal line sloping downward to the right.
1. @traight-line depreciation is a t'pical eample of a( A. $ariable cost. B. step-$ariable cost. C . f i ed c ost . . m i ed cos t. %. cur$ilinear cost.
10.
Answer( C )*( , &'pe( +C Which of the following choices denotes the t'pical cost beha$ior of ad$ertising and sales commissions? Ad$ertising @ales Commissions A. ariable ariable B. ariable =ied C. =ied ariable . =ied =ied %. @emi$ariable ariable Answer( C )*( , &'pe( 3
1.
ouglas Corporation recentl' produced and sold 1<<<<< units. =ied costs at this le$el of acti$it' amounted to I<<<
. %.
Answer( C )*( , &'pe( A 12.
%tron !nc. has onl' $ariable costs and fied costs. A re$iew of the compan'6s records disclosed that when 1<<<<< units were produced fied manufacturing costs amounted to I,<<<<< and the cost per unit manufactured totaled I. *n the basis of this information how much cost would the firm anticipate at an acti$it' le$el of :4<<< units? A . I 07 << <. B . I 0:1 << <. C . I 0:0 << <. . I << << <. %. @ome other amount not listed abo$e. Answer( B )*( , &'pe( A
14.
17.
Answer( A )*( , &'pe( +C ,1.
Answer( % )*( , &'pe( 3 1:. A cost that has both a fied and $ariable component is termed a( A. step-fied cost. B. step-$ariable cost. C. semi$ariable cost. . cur$ilinear cost. %. discretionar' cost. Answer( C )*( , &'pe( +C ,<. A mied cost is often #nown as a( A. semi$ariable cost. B. step-fied cost. C. $ariable cost.
+ichard Damilton has a fast-food franchise and must pa' a franchise fee of I<<< plus L of gross sales. !n terms of cost beha$ior the fee is a( A. $ariable cost. B . f i ed c ost . C. step-fied cost. . semi$ariable cost. %. cur$ilinear cost.
Answer( )*( , &'pe( 3 ,,. Which of the following are eamples of a mied cost?
A re$iew of /arr' Corporation6s accounting records found that at a $olume of :<<<< units the $ariable and fied cost per unit amounted to I7 and I0 respecti$el'. *n the basis of this information what amount of total cost would /arr' anticipate at a $olume of 7<<< units? A. I1<,<<<<. B . I 1 <0 < <<< . C . I 1 <2 < <<< . . I1<7<<<<. %. @ome other amount not listed abo$e. Answer( B )*( , &'pe( A %ach of a$idson6s production managers 8annual salar' cost I0<<<9 can o$ersee 2<<<< machine hours of manufacturing acti$it'. &hus if the compan' has <<<< hours of manufacturing acti$it' one manager is neededH for 4<<< hours two managers are neededH for 1,<<< hours three managers are neededH and so forth. a$idson6s salar' cost can best be described as a( A. $ariable cost. B. semi$ariable cost. C. step-$ariable cost. . f ie d co st . %. step-fied cost.
cur$ilinear cost. discretionar' cost.
I. II. III. IV.
A. B. C. . %.
A building that is used for both manufacturing and sales acti$ities. An emplo'ee6s compensation which consists of a fl at salar' plus a commission. epreciation that relates to fi$e different machines. Maintenance cost that must be split between sales and administrati$e offices. ! onl'. !! onl'. ! and !!!. ! !!! and !. ! !! !!! and !.
Answer( B )*( , &'pe( 3 ,.
Which of the following costs ehibits both decreasing and increasing marginal costs o$er a specific range of acti$it'? A. @emi$ariable cost. B. Cur$ilinear cost. C. @tep-fied cost. . @tep-$ariable cost. % . =i e d co st . Answer( B )*( , &'pe( +C
,0. &he rele$ant range is that range of acti$it'( A. where a compan' achie$es its maimum efficienc'. B. where units produced e;ual units sold. C. where management epects the firm to operate. . where the firm will earn a profit. %. where epected results are abnormall' high. Answer( C )*( &'pe( +C ,. Within the rele$ant range of acti$it' costs( A. can be estimated with reasonable accurac'. B. can be epected to change radicall'.
C. . %.
,2.
ehibit decreasing marginal cost patterns. ehibit increasing marginal cost patterns. cannot be estimated satisfactoril'.
Answer( A )*( &'pe( +C Within the rele$ant range a cur$ilinear cost function can sometimes be graphed as a( A. straight line. B . 5 ag ge d l in e. C. $ertical line. . cur$ed line. %. horizontal line. Answer( A )*( &'pe( +C
,4.
As a firm begins to operate outside the rele$ant range the accurac' of cost estimates for fied and $ariable costs( =ied Variable A. increases increases B. increases decreases C. decreases increases . decreases decreases %. decreases remains unchanged Answer( )*( &'pe( 3
,7.
A $ariable cost that has a definiti$e ph'sical relationship to the acti$it' measure is called a8n9( A. discretionar' cost. B. engineered cost. C. managed cost. . programmed cost. %. committed cost.
1. Which of the following is not an eample of a committed fied cost? A. /ropert' taes. B. epreciation on buildings. C. @alaries of management personnel. . *utla's for ad$ertising programs. %. %;uipment rental costs. Answer( )*( 0 &'pe( +C ,. Committed fied costs would include( A. ad$ertising. B. research and de$elopment. C. depreciation on buildings and e;uipment. . contributions to charitable organizations. %. ependitures for direct labor. Answer( C )*( 0 &'pe( +C . Amounts spent for charitable contributions are an eample of a8n9( A. committed fied cost. B. committed $ariable cost. C. discretionar' fied cost. . discretionar' $ariable cost. %. engineered cost. Answer( C )*( 0 &'pe( +C 0. Which of the following would not t'picall' be classified as a discretionar' fied cost? A. %;uipment depreciation. B. %mplo'ee de$elopment 8education9 programs. C . A d$e rt is in g. . *utla's for research and de$elopment. %. Charitable contributions.
Answer( B )*( 0 &'pe( +C Answer( A )*( 0 &'pe( +C ,:.
Costs that result from an organization6s ownership or use of facilities and its basic organizational structure are termed( A. discretionar' fied costs. B. committed fied costs. C. discretionar' $ariable costs. . committed $ariable costs. %. engineered costs. Answer( B )*( 0 &'pe( +C
<. /ropert' taes are an eample of a8n9( A. committed fied cost. B. committed $ariable cost. C. discretionar' fied cost. . discretionar' $ariable cost. %. engineered cost. Answer( A )*( 0 &'pe( +C
. Which of the following choices correctl' classifies a committed fied cost and a discretionar' fied cost? Committed iscretionar' A. /romotion Management salaries B. Building depreciation Charitable contributions C. Management training /ropert' taes . %;uipment rentals %;uipment depreciation %. +esearch and de$elopment Ad$ertising
2.
Answer( B )*( 0 &'pe( +C Which t'pe of fied cost 819 tends to be more long-term in nature and 8,9 can be cut bac# more easil' in bad economic times without doing serious harm to organizational goals and ob5ecti$es? )ong &erm in Can be Cut Bac# More %asil' !n 3ature Bad %conomic &imes A. Committed Committed B. Committed iscretionar'
C. . %.
iscretionar' iscretionar' Committed
Committed iscretionar' 3o difference between committed and discretionar'
Answer( B )*( 0 &'pe( 3 4.
Digh-tech automation combined with a downsizing of a compan'6s hourl' labor force often results in( A. increased fied costs and increased $ariable costs. B. increased fied costs and reduced $ariable costs. C. reduced fied costs and increased $ariable costs. . reduced fied costs and reduced $ariable costs. %. increased discretionar' fied costs and reduced committed fied costs.
B. C. . %.
high-low method. $isual-fit method. account anal'sis method. multiple regression method.
Answer( C )*( &'pe( +C 0,. Which of the following methods of cost estimation relies on onl' two data points? A. )east-s;uares regression. B. &he high-low method. C. &he $isual-fit method. . Account anal'sis. %. Multiple regression. Answer( B )*( &'pe( +C
Answer( B )*( 0 &'pe( +C se the following to answer ;uestions 0-00( 7. Which of the following techni;ues is not used to anal'ze cost beha$ior? A. )east-s;uares regression. B. Digh-low method. C. isual-fit method. . )inear programming. %. Multiple regression. Answer( )*( 2 &'pe( +C :.
&he A. B. C. . %.
high-low method and least-s;uares regression are used b' accountants to( e$aluate di$isional managers for purposes of raises and promotions. choose among alternati$e courses of action. maimize output. estimate costs. control operations.
Answer( )*( &'pe( +C 0<. Which of the following statements about the $isual-fit method is 8are9 true? I. II. III.
A. B. C. . %.
&he method results in the creation of a scatter diagram. &he method is not totall' ob5ecti$e because of the manner in which the cost line is determined. &he method is especiall' helpful in the determination of outliers. ! onl'. !! onl'. ! and !!. ! and !!!. ! ! ! an d ! !!.
Answer( % )*( &'pe( +C 01. &he nonstatistical method of cost estimation that calls for the creation of a scatter diagram is the( A. least-s;uares regression method.
@wanson and Associates presentl' leases a cop' machine under an agreement that calls for a fied fee each month and a charge for each cop' made. @wanson made 4<<< copies and paid a total of I2< in MarchH in Ma' the firm paid I,7< for <<< copies. &he compan' uses the high-low method to anal'ze costs. 0. @wanson6s $ariable cost per cop' is( A. I<.<0<. B. I<.<1. C. I<.<. . I<.<2. %. an amount other than those gi$en abo$e. Answer( A )*( &'pe( A 00. @wanson6s monthl' fied fee is( A. I7<. B. I1<,. C. I1<2. . I11,. %. an amount other than those gi$en abo$e. Answer( A )*( &'pe( A se the following to answer ;uestions 0-04( Atlanta !nc. which uses the high-low method to anal'ze cost beha$ior has determined that machine hours best eplain the compan'6s utilities cost. &he compan'6s rele$ant range of acti$it' $aries from a low of 2<< machine hours to a high of 11<< machine hours with the following data being a$ailable for the first si months of the 'ear( Month Eanuar' =ebruar' March April Ma'
tilities I74<< 72< 7:< :2< :2,
Machine Dours 7<< 4,< 71< :,< :<
Eune
:1<
:<<
0. &he $ariable utilities cost per machine hour is( A. I<.17. B. I0.<. C. I.<<. . I.<. %. an amount other than those listed abo$e. Answer( )*( &'pe( A 02. &he A. B. C. . %.
fied utilities cost per month is( I420. I00<<. I042<. I1<<. an amount other than those listed abo$e.
Answer( B )*( &'pe( A 04. sing the high-low method the utilities cost associated with :7< machine hours would be( A. I:1<. B. I:22<. C. I:4<<. . I:4:<. %. an amount other than those listed abo$e. Answer( )*( &'pe( A 07.
Ditchcoc# !nc. uses the high-low method to anal'ze cost beha$ior. &he compan' obser$ed that at 1,<<< machine hours of acti$it' total maintenance costs a$eraged I4.<< per hour. When acti$it' 5umped to 1<<< machine hours which was still within the rele$ant range the a$erage cost per machine hour totaled I2.0<. *n the basis of this information the $ariable cost per machine hour was( A. I0.<<. B. I2.0<. C. I2.4<. . I4.<<. %. an amount other than those listed abo$e. Answer( A )*( &'pe( A
0:.
3orthridge !nc. uses the high-low method to anal'ze cost beha$ior. &he compan' obser$ed that at ,<<<< machine hours of acti$it' total maintenance costs a$eraged I1<.< per hour. When acti$it' 5umped to ,0<<< machine hours which was still within the rele$ant range the a$erage cost per machine hour totaled I:.4. *n the basis of this information the compan'6s fied maintenance costs were( A. I,0<<<. B. I:<<<<. C. I,1<<<. . I ,0 << <. %. an amount other than those listed abo$e.
Answer( B )*( &'pe( A <. &he following data relate to the Dodges Compan' for Ma' and August of the current 'ear(
Maintenance hours Maintenance cost
Ma' 1<<<< I,2<<<<
August 1,<<< I<<<<<
Ma' and August were the lowest and highest acti$it' le$els and Dodges uses the high-low method to anal'ze cost beha$ior. Which of the following statements is true? A. &he $ariable maintenance cost is I, per hour. B. &he $ariable maintenance cost is I,.< per hour. C. &he $ariable maintenance cost is I,2 per hour. . &he fied maintenance cost is I2<<<< per month. %. More than one of the abo$e statements is true. Answer( )*( &'pe( A se the following to answer ;uestions 1-( ang Manufacturing which uses the high-low method ma#es a product called in. &he compan' incurs three different cost t'pes 8A B and C9 and has a rele$ant range of operation between ,<< units and 1<<<< units per month. /er-unit costs at two different acti$it' le$els for each cost t'pe are presented below.
<<< units 4<< units
&'pe A I0 I0
&'pe B I: I2
&'pe C I0 I
1. &he cost t'pes shown abo$e are identified b' beha$ior as( &'pe A &'pe B &'pe C A. =ied ariable @emi$ariable B. =ied @emi$ariable ariable C. ariable @emi$ariable =ied . ariable =ied @emi$ariable %. @emi$ariable ariable =ied Answer( )*( , &'pe( A 3 ,. !f ang produces 1<<<< units the total cost would be( A. I:<<<<. B . I1<<<<<. C . I 11 < <<< . . I 1, << <. %. an amount other than those gi$en abo$e. Answer( C )*( &'pe( A . &he cost formula that epresses the beha$ior of ang6s total cost is( A . N I< K I 14 O. B. N I,<<<< K I1O. C. N I0<<<< K I:O. . N I0<<< K I0O.
&otal I14 I1
%.
N I2<<<< K IO.
7.
Answer( % )*( &'pe( A 0. !n regression anal'sis the $ariable that is being predicted is #nown as the( A. independent $ariable. B. dependent $ariable. C. eplanator' $ariable. . interdependent $ariable. %. functional $ariable.
ariable cost per unit sold &otal monthl' fied cost
@catter iagram I2.< I0<<<
+egression A I2.7< I0,
&empe is now preparing an estimate for monthl' sales of 17<<< units. *n the basis of the data presented compute the most accurate sales forecast possible. A . I 1 : < <. B . I 12 , << <. C . I 12 0 :< <. . I 12 4 0< <. %. An amount other than those listed abo$e.
Answer( B )*( &'pe( +C .
&empe !nc. is stud'ing mar#eting cost and sales $olume and has generated the following information b' use of a scatter diagram and a least-s;uares regression anal'sis(
Mohaw# /roducts has determined that the number of machine hours wor#ed 8MD9 dri$es the amount of manufacturing o$erhead incurred 8M*D9. *n the basis of this relationship a staff anal'st has constructed the following regression e;uation(
Answer( C )*( &'pe( A 3 M*D N ,0<<<< K 7MD
:.
Which of the choices correctl' depicts the nature of Mohaw#6s $ariables? ependent !ndependent A. M*D M*D B. M*D MD C. MD M*D . MD MD %. 7 ,0<<<<
Answer( B )*( 2 &'pe( 3
Answer( B )*( &'pe( 3 2.
4.
Chec#ers Corporation which uses least-s;uares regression anal'sis has deri$ed the following regression e;uation for estimates of manufacturing o$erhead( N 0:<<< K .2O. Which of the following statements is true if the primar' cost dri$er is machine hours? A. &otal manufacturing o$erhead is represented b' the $ariable "O." B. &he compan' anticipates I0:<<< of fied manufacturing o$erhead. C. "O" is commonl' #nown as the dependent $ariable. . "O" represents the number of machine hours. %. Both "B" and "" are true. Answer( % )*( &'pe( 3 Boulder !nc. recentl' conducted a least-s;uares regression anal'sis to predict selling epenses. &he compan' has constructed the following regression e;uation( N ,:<<< K 4.7
Waller %nterprises has determined that three $ariables pla' a #e' role in determining compan' re$enues. &o arri$e at an ob5ecti$e forecast of re$enues for the net accounting period Waller should use( A. simple regression. B. multiple regression. C. a scatter diagram. . comple regression. %. the high-low method.
2<.
21.
Which of the following tools is not associated with cost estimation? A. )east-s;uares regression. B. Multiple regression. C. !n$ersion e;uations. . &ime and motion 8engineering9 studies. %. )earning cur$es. Answer( C )*( 2 &'pe( +C A staff assistant at Washington Corporation recentl' determined that the first four units completed in a new manufacturing process too# 7<< hours to complete or an a$erage of ,<< hours per unit. &he assistant also found that when the cumulati$e output produced doubles the a$erage labor time declines b' ,
2,. Which of the following is not an issue in the collection of data for cost estimation? A. *utliers. B. Missing data.
C. . %.
Mismatched time periods. ! nf la ti on . All of the abo$e are issues in data collection.
Answer( % )*( 4 &'pe( +C 2.
A high +, measure in regression anal'sis is preferred because( A. it indicates a good fit of the regression line through the data points. B. it shows that a great deal of the change in the dependent $ariable is eplained b' change in the independent $ariable. C. it means that the independent $ariable is a good predictor of the dependent $ariable. . it means that the cost anal'st can be relati$el' confident in his or her cost predictions. %. all of the preceding statements are true. Answer( % )*( 7 &'pe( +C
MULTIPLE CHOICE QUESTIONS
1. C/ anal'sis can be used to stud' the effect of( A. changes in selling prices on a compan'6s profitabilit'. B. changes in $ariable costs on a compan'6s profitabilit'. C. changes in fied costs on a compan'6s profitabilit'. . changes in product sales mi on a compan'6s profitabilit'. %. all of the abo$e. Answer( % )*( 1 &'pe( +C ,. &he brea#-e$en point is that le$el of acti$it' where( A. total re$enue e;uals total cost. B. $ariable cost e;uals fied cost. C. total contribution margin e;uals the sum of $ariable cost plus fied cost. . sales re$enue e;uals total $ariable cost. %. profit is greater than zero. Answer( A )*( 1 &'pe( +C . &he unit contribution margin is calculated as the difference between( A. selling price and fied cost per unit. B. selling price and $ariable cost per unit. C. selling price and product cost per unit. . fied cost per unit and $ariable cost per unit. %. fied cost per unit and product cost per unit. Answer( B )*( 1 &'pe( +C 0.
Which of the following would produce the largest increase in the contribution margin per unit? A. A 4L increase in selling price. B. A 1L decrease in selling price.
C. . %.
A 10L increase in $ariable cost. A 14L decrease in fied cost. A ,L increase in the number of units sold.
Answer( A )*( 1 &'pe( 3 . Which of the following would ta#e place if a compan' were able to reduce its $ariable cost per unit? Contribution Brea#-e$en Margin /oint A. !ncrease !ncrease B. !ncrease ecrease C. ecrease !ncrease . ecrease ecrease %. !ncrease 3o effect Answer( B )*( 1 &'pe( 3 2. Which of the following would ta#e place if a compan' eperienced an increase in fied costs? A. 3et income would increase. B. &he brea#-e$en point would increase. C. &he contribution margin would increase. . &he contribution margin would decrease. %. More than one of the abo$e e$ents would occur. Answer( B )*( 1 &'pe( 3 4. Assuming no change in sales $olume an increase in a firm6s per-unit contribution margin would( A. increase net income. B. decrease net income. C. ha$e no effect on net income. . increase fied costs. %. decrease fied costs. Answer( A )*( 1 &'pe( 3 7. A compan' that desires to lower its brea#-e$en point should stri$e to( A. decrease selling prices. B. reduce $ariable costs. C. increase fied costs. . sell more units. %. pursue more than one of the abo$e actions. Answer( B )*( 1 &'pe( 3 :. A compan' has fied costs of I:<< and a per-unit contribution margin of I. Which of the following statements is 8are9 true? A. %ach unit "contributes" I toward co$ering the fied costs of I:<<. B. &he situation described is not possible and there must be an error. C. *nce the brea#-e$en point is reached the compan' will ma#e mone' at the rate of I per unit. . &he firm will definitel' lose mone' in this situation.
%.
@tatements "A" and "C" are true.
Answer( % )*( 1 &'pe( 3
1<.
@anderson sells a single product for I< that has a $ariable cost of I<. =ied costs amount to I per unit when anticipated sales targets are met. !f the compan' sells one unit in ecess of its brea#-e$en $olume the bottom-line profit will be( A. I1. B. I,<. C. I<. . an amount that cannot be deri$ed based on the information presented. %. an amount other than those in choices "A" "B" and "C" but one that can be deri$ed based on the information presented.
10.
Sales revenue %aria&le costs i(ed costs
Answer( A )*( 1 &'pe( A 1.
Answer( B )*( 1 &'pe( A 1,.
A recent income statement of Ban#s Corporation reported the following data( Sales revenue %aria&le costs i(ed costs
!"#$$$#$$$ '#$$$#$$$ )#)$$#$$$
12. reen !nc. sells a single product for I,<. ariable costs are I7 per unit and fied costs total I1,<<<< at a $olume le$el of <<< units. Assuming that fied costs do not change reen6s brea#-e$en sales would be( A . I 12 < << <. B . I,<<<<<. C . I<<<<<. . I 07 < << <. %. an amount other than those abo$e.
would be( I0<. I1<. I,:<. I2<. an amount other than those abo$e.
Answer( B )*( 1 &'pe( A 1. A recent income statement of =o Corporation reported the following data( Sales revenue %aria&le costs i(ed costs
Answer( )*( 1 &'pe( A
Answer( B )*( 1 &'pe( A 14.
!*#+$$#$$$ ,#+$$#$$$ ,#$$$#$$$
!f these data are based on the sale of 1<<<< units the brea#-e$en point would be( A . , < << u ni ts . B . , 4 47 un it s. C . 2 << un it s. . < << u ni ts . %. an amount other than those abo$e.
)awton !nc. sells a single product for I1,. ariable costs are I7 per unit and fied costs total I2<<<< at a $olume le$el of 2<<<< units. Assuming that fied costs do not change )awton6s brea#-e$en point would be( A. <<<< units. B. 0<<< units. C. :<<<< units. . negati$e because the compan' loses I, on e$er' unit sold. %. a positi$e amount other than those gi$en abo$e. Answer( C )*( 1 &'pe( A
!f these data are based on the sale of ,<<<< units the contribution margin per unit A. B. C. . %.
!)#'$$#$$$ ,#'$$#$$$ "$$#$$$
!f these data are based on the sale of <<< units the brea#-e$en sales would be( A. I,<<<<<<. B . I , ,<2 << <. C . I , << << <. . I1<<<<<<<. %. an amount other than those abo$e.
Answer( B )*( 1 &'pe( A 11. At a $olume of 1<<< units Boston reported sales re$enues of I2<<<<< $ariable costs of I,,<<< and fied costs of I1,<<<<. &he compan'6s contribution margin per unit is( A. I14. B. I,. C. I04. . I. %. an amount other than those abo$e.
A recent income statement of ale Corporation reported the following data(
*rion recentl' reported sales re$enues of I7<<<<< a total contribution margin of I<<<<< and fied costs of I17<<<<. !f sales $olume amounted to 1<<<< units the compan'6s $ariable cost per unit must ha$e been( A. I1,. B. I,. C. I<. . I:,. %. an amount other than those abo$e. Answer( C )*( 1 &'pe( A
17.
@trand has a brea#-e$en point of 1,<<<< units. !f the firm6s sole product sells for I0< and fied costs total I07<<<< the $ariable cost per unit must be( A. I0.
B. C. . %.
I2. I00. an amount that cannot be deri$ed based on the information presented. an amount other than those in choices "A" "B" and "C" but one that can be deri$ed based on the information presented.
+ibco Co. ma#es and sells onl' one product. &he unit contribution margin is I2 and the brea#-e$en point in unit sales is ,0<<<. &he compan'6s fied costs are( A. I0<<<. B. I100<<. C. I0<<<<. . I 100 << <. %. an amount other than those abo$e. Answer( )*( 1 &'pe(
Answer( )*( , &'pe( +C ,1. At a $olume le$el of <<<<< units @ulli$an reported the following information( @ales price ariable cost per unit =ied cost per unit
I2< ,< 0
&he compan'6s contribution-margin ratio is( A. <.. B. <.0<. C. <.2<. . <.24. %. an amount other than those abo$e. Answer( )*( , &'pe( A ,,.
Which of the following epressions can be used to calculate the brea#-e$en point with the contribution-margin ratio 8CM+9? A. CM+ P fied costs. B. CM+ fied costs. C. =ied costs P CM+. . 8=ied costs K $ariable costs9 CM+. %. 8@ales re$enue - $ariable costs9 P CM+.
Answer( C )*( , &'pe( se the following to answer ;uestions ,-<(
G
'
(
0,000
C
!0,000
)
20,000
,<. &he contribution-margin ratio is( A. the difference between the selling price and the $ariable cost per unit. B. fied cost per unit di$ided b' $ariable cost per unit. C. $ariable cost per unit di$ided b' the selling price. . unit contribution margin di$ided b' the selling price. %. unit contribution margin di$ided b' fied cost per unit.
&
%
80,000
Answer( B )*( 1 &'pe( A 1:.
C o s t- V o u m e - P ro t G ra p $100,000
0 ,.
1,000
2 ,0 0 0
3,000
)ine A is the( A. total re$enue line. B. fied cost line. C. $ariable cost line. . total cost line. % . p rof it li ne. Answer( A )*( &'pe( +C
,0. )ine C represents the le$el of( A . f i ed co st . B. $ariable cost. C. semi$ariable cost. . t ot al cos t. % . m i ed c os t. Answer( A )*( &'pe( +C ,. &he slope of line A is e;ual to the( A. fied cost per unit. B. selling price per unit. C. profit per unit. . semi$ariable cost per unit. %. unit contribution margin. Answer( B )*( &'pe( +C ,2. &he slope of line B is e;ual to the( A. fied cost per unit. B. selling price per unit. C. $ariable cost per unit.
! ,0 0 0
5,000
" # its
. %.
profit per unit. unit contribution margin.
P ro f t- V o u m e G ra p $!0,000
&
Answer( C )*( &'pe( +C ,4.
&he A. B. C. . %.
$ertical distance between the total cost line and the total re$enue line represents( f ie d co st . $ariable cost. profit or loss at that $olume. semi$ariable cost. the safet' margin.
Answer( C )*( &'pe( +C ,7. Assume that the firm whose cost structure is depicted in the figure epects to produce a loss for the upcoming period. &he loss would be shown on the graph( A. b' the area immediatel' abo$e the brea#-e$en point. B. b' the area immediatel' below the total cost line. C. b' the area diagonall' to the right of the brea#-e$en point. . b' the area diagonall' to the left of the brea#-e$en point. %. in some other area not mentioned abo$e. Answer( )*( &'pe( +C ,:.
At a gi$en sales $olume the $ertical distance between the fied cost line and the total cost line represents( A . f ie d co st . B. $ariable cost. C. profit or loss at that $olume. . semi$ariable cost. %. the safet' margin. Answer( B )*( &'pe( +C
<. Assume that the firm whose cost structure is depicted in the figure epects to produce a profit for the upcoming accounting period. &he profit would be shown on the graph b' the letter( A. . B. %. C. =. . . %. D. Answer( )*( &'pe( se the following to answer ;uestions 1-,(
20,000
0 2,000
!,000
,000
" # i ts
20,000
!0,000
0,000
1.
)ine A is the( A. fied cost line. B. $ariable cost line. C. total cost line. . total re$enue line. % . p rof it li ne. Answer( % )*( &'pe( 3
,. &he triangular area between the horizontal ais and )ine A to the right of 0<<< represents( A . f i ed co st . B. $ariable cost. C. profit. . loss. %. sales re$enue. Answer( C )*( &'pe( . A recent income statement of *slo Corporation reported the following data( Units sold Sales revenue %aria&le costs i(ed costs
"#$$$ !-#)$$#$$$ #$$$#$$$ ,#+$$#$$$
!f the compan' desired to earn a target net profit of I07<<<< it would ha$e to sell( A . 1 ,< < uni ts . B . , 7< < u ni ts . C . 0 << < u ni ts . . ,< < uni ts . %. an amount other than those abo$e.
Answer( )*( 0 &'pe( A 0.
ellow !nc. sells a single product for I1<. ariable costs are I0 per unit and fied costs total I1,<<<< at a $olume le$el of 1<<<< units. What dollar sales le$el would ellow ha$e to achie$e to earn a target net profit of I,0<<< A . I 0<< << <. B . I << << <. C . I 2<< << <. . I 4< << <. %. I:<<<<<. Answer( C )*( 0 &'pe( A
se the following to answer ;uestions -4( Archie sells a single product for I<. ariable costs are 2
&he A. B. C. . %.
difference between budgeted sales re$enue and brea#-e$en sales re$enue is the( contribution margin. contribution-margin ratio. safet' margin. target net profit. operating le$erage.
Answer( C )*( 0 &'pe( +C
:. Maie6s budget for the upcoming 'ear re$ealed the following figures( @ales re$enue Contribution margin 3et income
I70<<<< <0<<< 0<<<
!f the compan'6s brea#-e$en sales total I4<<<< Maie6s safet' margin would be( A . I 8:< < << 9. B . I:<<<<. C . I,02<<<. . I 2 << <. % . I2:2<<<. Answer( B )*( 0 &'pe( A 0<. !f a compan' desires to increase its safet' margin it should( A. increase fied costs. B. decrease the contribution margin. C. decrease selling prices assuming the price change will ha$e no effect on demand. . stimulate sales $olume. %. attempt to raise the brea#-e$en point. Answer( )*( 0 &'pe( 3 01. ana sells a single product at I,< per unit. &he firm6s most recent income statement re$ealed unit sales of 1<<<<< $ariable costs of I7<<<<< and fied costs of I0<<<<<. !f a I0 drop in selling price will boost unit sales $olume b' ,
=ied costs @elling price ariable cost @ales 8units9
Current *peration I7<<< I12 I1< :<<<
@hould rimes ma#e the change? A. es the compan' will be better off b' I2<<<. B. 3o because sales will drop b' <<< units. C. 3o because the compan' will be worse off b' I0<<<.
Anticipated *peration I07<<< I,, I1, 2<<<
. %.
3o because the compan' will be worse off b' I,,<<<. !t is impossible to 5udge because additional information is needed.
Answer( C )*( 0 &'pe( A
Answer( C )*( 0 &'pe( A All other things being e;ual a compan' that sells multiple products should attempt to structure its sales mi so the greatest portion of the mi is composed of those products with the highest( A. selling price. B. $ariable cost. C. contribution margin. . f ie d co st . % . g ro ss m arg in. Answer( C )*( &'pe( 3
0.
An amount other than those abo$e. Cannot be determined based on the information presented.
Answer( A )*( &'pe( A se the following to answer ;uestions 04-<(
0. leason sells a single product at I10 per unit. &he firm6s most recent income statement re$ealed unit sales of 7<<<< $ariable costs of I7<<<<< and fied costs of I2<<<<. Management belie$es that a I drop in selling price will boost unit sales $olume b' ,
00.
. %.
*6ell sells three products( + @ and &. Budgeted information for the upcoming accounting period follows.
)amar Q Co. ma#es and sells two t'pes of shoes /lain and =anc'. ata concerning these products are as follows(
nit selling price ariable cost per unit
/lain I,<.<< 1,.<<
=anc' I.<< ,0.<
@it' percent of the unit sales are /lain and annual fied epenses are I0<<<. 04. &he weighted-a$erage unit contribution margin is( A. I0.7<. B. I:.<<. C. I:.,. . I14.<<. %. an amount other than those abo$e. Answer( B )*( &'pe( A 07. Assuming that the sales mi remains constant the total number of units that the compan' must sell to brea# e$en is( A. ,0,. B. ,204. C. 044. . <<<. %. an amount other than those abo$e. Answer( )*( &'pe( A
/roduct + @ &
@ales olume 8nits9 12<<< 1,<<< ,<<<
@elling /rice I10 1< 11
ariable Cost I: 2 7
&he compan'6s weighted-a$erage unit contribution margin is( A. I.<<. B. I.. C. I0.<<. . I1:.. %. an amount other than those abo$e. Answer( B )*( &'pe( A 02. Wells Corporation has the following sales mi for its three products( A ,
0:. Assuming that the sales mi remains constant the number of units of /lain that the compan' must sell to brea# e$en is( A. ,<<<. B. <<<. C. 4. . <<<. %. 2,. Answer( B )*( &'pe( A <. Assuming that the sales mi remains constant the number of units of =anc' that the compan' must sell to brea# e$en is( A. ,<<<. B. <<<. C. 4. . <<<. %. 2,. Answer( A )*( &'pe( A
1. Which of the following underl'ing assumptions form8s9 the basis for cost-$olume profit anal'sis? A. +e$enues and costs beha$e in a linear manner. B. Costs can be categorized as $ariable fied or semi$ariable. C. Wor#er efficienc' and producti$it' remain constant. . !n multiproduct organizations the sales mi remains constant. %. All of the abo$e are assumptions that underlie cost-$olume-profit anal'sis.
2. &. '. C. ). (.
Which of the following does not t'picall' appear on an income statement prepared b' using a traditional format? Cost of goods sold. Contribution margin. ross margin. @elling epenses. Administrati$e epenses.
Answer( % )*( 2 &'pe( +C Answer( B )*( 4 &'pe( +C ,.
Cost-$olume-profit anal'sis is based on certain general assumptions. Which of the following is not one of these assumptions? A. /roduct prices will remain constant as $olume $aries within the rele$ant range. B. Costs can be categorized as fied $ariable or semi$ariable. C. &he efficienc' and producti$it' of the production process and wor#ers will change to reflect manufacturing ad$ances. . &otal fied costs remain constant as acti$it' changes. %. nit $ariable cost remains constant as acti$it' changes.
4.
Answer( C )*( 2 &'pe( +C . &he assumptions on which cost-$olume-profit anal'sis is based appear to be most $alid for businesses( A. o$er the short run. B. o$er the long run. C. o$er both the short run and the long run. . in periods of sustained profits. %. in periods of increasing sales.
&he b'( A. B. C. . %.
etent to which an organization uses fied costs in its cost structure is measured financial le$erage. operating le$erage. fied cost le$erage. contribution le$erage. efficienc' le$erage.
Answer( B )*( 7 &'pe( +C 7. A manager who wants to determine the percentage impact on net income of a gi$en percentage change in sales would multipl' the percentage increase>decrease in sales re$enue b' the( A. contribution margin. B. gross margin. C. operating le$erage factor. . safet' margin. %. contribution-margin ratio.
Answer( A )*( 2 &'pe( 3 Answer( C )*( 7 &'pe( +C 0. &he contribution income statement differs from the traditional income statement in which of the following wa's? A. &he traditional income statement separates costs into fied and $ariable components. B. &he traditional income statement subtracts all $ariable costs from sales to obtain the contribution margin. C. Cost-$olume-profit relationships can be anal'zed more easil' from the contribution income statement. . &he effect of sales $olume changes on profit is readil' apparent on the traditional income statement. %. &he contribution income statement separates costs into product and period categories.
.
Answer( C )*( 4 &'pe( +C Which of the following does not t'picall' appear on a contribution income statement? A . 3 et in com e. B. ross margin. C. Contribution margin. . &otal $ariable costs. %. &otal fied costs. Answer( B )*( 4 &'pe( +C
:.
2<.
Which of the following calculations can be used to measure a compan'6s degree of operating le$erage? A. Contribution margin P sales. B. Contribution margin P net income. C. @ales P contribution margin. . @ales P net income. %. @ales P fied costs. Answer( B )*( 7 &'pe( ou are anal'zing Bec#er Corporation and 3ewton Corporation and ha$e concluded that Bec#er has a higher operating le$erage factor than 3ewton. Which one of the following choices correctl' depicts 819 the relati$e use of fied costs 8as opposed to $ariable costs9 for the two companies and 8,9 the percentage change in income caused b' a change in sales? +elati$e se of =ied /ercentage Change in Costs as *pposed to !ncome Caused b' ariable Costs a Change in @ales A. reater for Bec#er reater for Bec#er B. reater for Bec#er )ower for Bec#er C. reater for Bec#er %;ual for both
. %.
)ower for Bec#er )ower for Bec#er
reater for Bec#er )ower for Bec#er
Answer( A )*( 7 &'pe( +C 21. &he following information relates to a' Compan'( @ales re$enue Contribution margin 3et income
I1,<<<<<< 07<<<<< 7<<<<<
a'6s operating le$erage factor is( A. <.<24. B. <.124. C. <.0<<. . ,.<<. %. 2.<<<.
2. %dco6s operating le$erage factor was( A. 0. B. . C. 2. . 4. %. 7. Answer( B )*( 7 &'pe( A 20. !f %dco6s sales re$enues increase 1L what will be the percentage increase in income before income taes? A. 1L. B. 0L. C. 2
Answer( % )*( 7 &'pe( A 2,. &he following information relates to /aterno Compan'( @ales re$enue Contribution margin 3et income
I1<<<<<<< 0<<<<<< 1<<<<<<
!f a manager at /aterno desired to determine the percentage impact on net income of a gi$en percentage change in sales the manager would multipl' the percentage increase>decrease in sales re$enue b'( A. <.,. B. <.0<. C. ,.<. . 0.<<. %. 1<.<<.
2. When ad$anced manufacturing s'stems are installed what effect does such installation usuall' ha$e on fied costs and the brea#-e$en point? =ied Costs Brea#-e$en /oint A. !ncrease !ncrease B. !ncrease ecrease C. ecrease !ncrease . ecrease ecrease %. o not change oes not change Answer( A )*( 7 &'pe( +C 22. Which of the following statements is 8are9 true regarding a compan' that has implemented fleible manufacturing s'stems and acti$it'-based costing? I.
Answer( )*( 7 &'pe( A 3 se the following to answer ;uestions 2-20(
II.
%dco Compan' produced and sold 0<<< units of a single product last 'ear with the following results(
III.
@ales re$enue Manufacturing costs( ariable =ied @elling costs( ariable =ied Administrati$e costs( ariable =ied
I1<<<<
A. B. C. . %.
7<<< ,4<<<< 0<<< 0<<< 170<< 1<7<<<
&he compan' has erred as these two practices used in con5unction with one another will se$erel' limit the firm6s abilit' to anal'ze costs o$er the rele$ant range. Costs formerl' $iewed as fied under traditional-costing s'stems ma' now be considered $ariable with respect to changes in cost dri$ers such as number of setups number of material mo$es and so forth. As compared with the results obtained under a traditional-costing s'stem the concept of brea#-e$en anal'sis loses meaning. ! onl'. !! onl'. !!! onl '. ! and !!. !! and !!!.
Answer( B )*( 1< &'pe( 3 24.
A compan' sub5ect to a 0
necessar' to produce this income le$el? A . I ,<< << <. B . I << << <. C . I << << <. . I 7 . % . I 1 , < <<< . Answer( )*( 11 &'pe( A MULTIPLE CHOICE QUESTIONS
1. A standard cost( A. is the "true" cost of a unit of production. B. is a budget for the production of one unit of a product or ser$ice. C. can be useful in calculating e;ui$alent units. . is normall' the a$erage cost within an industr'. %. is almost alwa's the actual cost from pre$ious 'ears. Answer( B )*( 1 &'pe( +C ,. Which of the following is a predetermined estimated cost that can be used in the calculation of a $ariance? A. /roduct cost. B . A ct ua l co st . C. @tandard cost. . ifferential cost. %. Marginal cost. Answer( C )*( 1 &'pe( +C .
ariances are computed b' ta#ing the difference between which of the following? A. /roduct cost and period cost. B. Actual cost and differential cost. C. /rice factors and rate factors. . Actual cost and standard cost. %. /roduct cost and standard cost. Answer( )*( 1 &'pe( +C
0. &he term "management b' eception" is best defined as( A. choosing eceptional managers. B. controlling actions of subordinates through acceptance of management techni;ues. C. in$estigating unfa$orable $ariances. . de$oting management time to in$estigate significant $ariances. %. controlling costs so that non-zero $ariances are treated as "eceptional." Answer( )*( 1 &'pe( +C 3 . Which of the following are methods for setting standards? A. Anal'sis of historical data. B. &as# anal'sis. C. &as# anal'sis and the anal'sis of historical data.
. %.
Matri application forms. oal congruence.
Answer( C )*( , &'pe( +C 2. Which of the following indi$iduals is least li#el' to become in$ol$ed in the setting of either direct material standards or direct labor standards? A. &he purchasing manager. B. A production super$isor. C . A n en gi ne er. . A machine operator. %. A compan'6s president. Answer( % )*( , &'pe( 3 4. A perfection standard( A. tends to moti$ate emplo'ees o$er a long period of time. B. is attainable in an ideal operating en$ironment. C. would ma#e allowances for normal amounts of scrap and waste. . is generall' preferred b' beha$ioral scientists. %. will result in a number of fa$orable $ariances on a performance report. Answer( B )*( , &'pe( +C 3 7. Consider the following statements( I. II. III.
Beha$ioral scientists find that perfection standards often discourage emplo'ees and result in low wor#er morale. /ractical standards are also #nown as attainable standards. /ractical standards incorporate a certain amount of inefficienc' such as that caused b' an occasional machine brea#down.
Which of the abo$e statements is 8are9 true? A. ! onl'. B. !! onl'. C . !!! onl '. . ! ! a nd ! !! . % . ! ! ! an d ! !! . Answer( % )*( , &'pe( +C :. Which of the following would be considered if a compan' desires to establish a series of practical manufacturing standards? A. &he producti$it' loss associated with a short-term wor#er slowdown. B. 3ormal defect rates in an assembl' process. C. Dighl' unusual spoilage rates with direct materials. . Fuantit' discounts associated with purchases of direct materials. %. Both "B" and "" Answer( % )*( , &'pe( +C 3 1<. Which of the following would not be considered if a compan' desires to establish a series of practical manufacturing standards?
A. B. C. . %.
/roduction time lost during unusual machiner' brea#downs. 3ormal wor#er fatigue. =reight charges on incoming raw materials. /roduction time lost during setup procedures for new manufacturing runs. &he historical ,L defect rate associated with raw material inputs.
B. C. . %.
number of units spoiled. number of units that should ha$e been used. number of units actuall' used. number of units to be purchased during the net accounting period.
Answer( A )*( &'pe( +C Answer( A )*( , &'pe( +C 3 1. 11. Which of the following choices correctl' notes a characteristic associated with perfection standards and one associated with practical standards? /erfection @tandards /ractical @tandards A. Attainable in an ideal en$ironment !ncorporate abnormal occurrences when setting ;uantit' and efficienc' targets B. +esult in man' unfa$orable $ariances Are often attainable b' wor#ers C. &end to boost wor#er morale enerall' preferred b' beha$ioral scientists . enerall' are easil' achie$ed b' +esult in both fa$orable and unfa$orable wor#ers $ariances %. enerall' preferred b' beha$ioral scientists Are easier to achie$e than perfection standards 12. Answer( B )*( , &'pe( +C 3 1,. Consider the following statements( I. II. III.
&he standard cost per unit of materials is used to calculate a materials price $ariance. &he standard cost per unit of materials is used to calculate a materials ;uantit' $ariance. &he standard cost per unit of materials cannot be determined until the end of the period.
Which of the abo$e statements is 8are9 true? A. ! onl'. B. !! onl'. C. !!! onl'. . ! and !!. % . ! ! ! an d ! !!. Answer( )*( &'pe( +C 1. Which of the following choices correctl' notes the use of the standard price per unit of direct material when calculating the materials price $ariance and the materials ;uantit' $ariance? /rice ariance Fuantit' ariance A. sed Alwa's used B. sed *ccasionall' used C. sed 3ot used . 3ot used Alwa's used %. 3ot used 3ot used Answer( A )*( &'pe( +C 10. Most companies base the calculation of the materials price $ariance on the( A. number of units purchased.
Which of the following correctl' lists all the information needed to calculate a labor rate $ariance? A. @tandard labor rate and actual hours wor#ed. B. Actual hours wor#ed and actual units produced. C. @tandard labor rate actual labor rate and actual units produced. . Actual labor rate and actual hours wor#ed. %. Actual labor rate standard labor rate and actual hours wor#ed. Answer( % )*( &'pe( +C Which of the following $ariances are most similar with respect to the manner in which the' are calculated? A. )abor rate $ariance and labor efficienc' $ariance. B. Materials price $ariance and materials ;uantit' $ariance. C. Materials price $ariance materials ;uantit' $ariance and total materials $ariance. . Materials price $ariance and labor efficienc' $ariance. %. Materials ;uantit' $ariance and labor efficienc' $ariance. Answer( % )*( &'pe( 3
14. Which of the following $ariances cannot occur together during the same accounting period? A. nfa$orable labor rate $ariance and fa$orable labor efficienc' $ariance. B. nfa$orable labor efficienc' $ariance and fa$orable materials ;uantit' $ariance. C. =a$orable labor rate $ariance and unfa$orable total labor $ariance. . =a$orable labor efficienc' $ariance and fa$orable materials ;uantit' $ariance. %. 3one of the abo$e as all of these $ariance combinations are possible. Answer( % )*( &'pe( 3 17. !f a compan' has an unfa$orable direct-material ;uantit' $ariance then( A. the direct-material price $ariance is fa$orable. B. the total direct-material $ariance is unfa$orable. C. the total direct-material $ariance is fa$orable. . the direct-labor efficienc' $ariance is unfa$orable. %. an' of the abo$e $ariances can occur. Answer( % )*( &'pe( 3 1:. A fa$orable labor efficienc' $ariance is created when( A. actual labor hours wor#ed eceed standard hours allowed. B. actual hours wor#ed are less than the standard hours allowed. C. actual wages paid are less than amounts that should ha$e been paid. . actual units produced eceed budgeted production le$els. %. actual units produced eceed standard hours allowed.
Answer( B )*( &'pe( 3 ,<.
,0. Consider the following information(
ictoria !nc. recentl' completed ,<<< units of a product that was epected to consume fi$e pounds of direct material per finished unit. &he standard price of the direct material was I: per pound. !f the firm purchased and consumed ,27<<< pounds in manufacturing 8cost N I,<07<<9 the direct-materials ;uantit' $ariance would be figured as( A . I 4, <<< =. B. I4,<<<. C . I 1<4 ,< <=. . I 1<4 ,< <. %. none of the abo$e.
irect material purchased and used 7<<<< gallons @tandard ;uantit' of direct material allowed for Ma' production 42<<< gallons Actual cost of direct materials purchased and used I142<<< nfa$orable direct-material ;uantit' $ariance I:0<< &he direct-material price $ariance is( A . I 11 0< <=. B . I 11 0< < . C . I 1, << <=. . I 1, << <. %. none of the abo$e.
Answer( B )*( &'pe( A ,1.
@olo Corporation recentl' purchased ,<<< gallons of direct material at I.2< per gallon. sage b' the end of the period amounted to ,<<< gallons. !f the standard cost is I2.<< per gallon and t he compan' belie$es in computing $ariances at the earliest point possible the direct-material price $ariance would be calculated as( A. I7<<=. B. I:,<<=. C. I:,<<. . I 1< <<< =. %. I1<<<<.
Answer( C )*( &'pe( A 3 ,.
Answer( )*( &'pe( A se the following to answer ;uestions ,,-,( &he following data relate to product no. 7: of es Moines Corporation( irect material standard( s;uare feet at I,.< per s;uare foot irect material purchases( <<<< s;uare feet at I,.2< per s;uare foot irect material consumed( ,:,<< s;uare feet Manufacturing acti$it' product no. 7:( :2<< units completed ,,. &he direct-material ;uantit' $ariance is( A . I 1 << <=. B. I1<<<. C. I1<0<=. . I1<0<. %. I,<<<=. Answer( B )*( &'pe( A ,. &he A. B. C. . %.
direct-material price $ariance is( I,77<. I,:,<=. I,:,<. I << <=. I<<<.
Answer( % )*( &'pe( A
,2.
Courtne' purchased and consumed <<<< gallons of direct material that was used in the production of 11<<< finished units of product. According to engineering specifications each finished unit had a manufacturing standard of fi$e gallons. !f a re$iew of Courtne'6s accounting records at the end of the period disclosed a material price $ariance of I<<< and a material ;uantit' $ariance of I<<<= determine the actual price paid for a gallon of direct material. A. I<.<. B. I<.2<. C. I<.4<. . An amount other than those shown abo$e. %. 3ot enough information to 5udge. Answer( C )*( &'pe( A 3 Dolland %nterprises recentl' used ,<<<< labor hours to produce 7<< completed units. According to manufacturing specifications each unit is anticipated to ta#e ,. hours to complete. &he compan'6s actual pa'roll cost amounted to I4<<<<. !f the standard labor cost per hour is I17 Dolland6s labor rate $ariance is( A . I 1< << <=. B . I1<<<<. C . I 1< 4 =. . I 1< 4 . %. none of the abo$e. Answer( B )*( &'pe( A
,4.
en$er %nterprises recentl' used 10<<< labor hours to produce 4<< completed units. According to manufacturing specifications each unit is anticipated to ta#e two hours to complete. &he compan'6s actual pa'roll cost amounted to I17,<<. !f the standard labor cost per hour is I11 en$er6s labor efficienc' $ariance is( A . I 11 << < . B . I 11 << <=. C . I 11 < < . . I 11 < <=. %. none of the abo$e.
Answer( B )*( &'pe( A ,7.
. %.
Ale Compan' recentl' completed 1<2<< units of its single product consuming ,<<< labor hours that cost the firm I07<<<<. According to manufacturing specifications each unit should ha$e re;uired hours of labor time at I1.0< per hour. *n the basis of this information determine AleGs labor rate $ariance and labor efficienc' $ariance. +ate %fficienc' A. I1,4,<= I<<<= B. I1,4,<= I<<< C. I1,7<<= I<7<= . I1,7<<= I<7< %. I1,7<< I<7<
I ,1 << <=. none of the abo$e.
Answer( B )*( &'pe( A 3 ,.
@imms Corporation had a fa$orable direct-labor efficienc' $ariance of I2<<< for the period 5ust ended. &he actual wage rate was I<.< more than the standard rate of I1,.<<. !f the compan'6s standard hours allowed for actual production totaled :<< how man' hours did the firm actuall' wor#? A. :<<<. B. :<,<. C. ::7<. . 1<<<<. %. 3one of the abo$e.
Answer( )*( &'pe( A Answer( A )*( &'pe( A se the following to answer ;uestions -4(
se the following to answer ;uestions ,:-<( &he following data relate to product no. of )a Fuinta Corporation( irect labor standard( hours at I10 per hour irect labor used in production( 0<<< hours at a cost of I2:<<< Manufacturing acti$it' product no. ( 7:<< units completed ,:. &he direct-labor rate $ariance is( A . I 7 :< <=. B. I7:<<. C. I:<<<=. . I:<<<. %. none of the abo$e.
<. &he direct-labor efficienc' $ariance is( A . I 4 << <=. B. I4<<<. C. I41<<=. . I41<<. %. none of the abo$e.
Actual results( nits produced irect material purchased irect material used irect labor
47<< units ,2<<< pounds at I,.4< ,1<< pounds at I,.4< 0<1<< hours at I4.<
Answer( A )*( &'pe( A 0. &he A. B. C. . %.
Answer( B )*( &'pe( A 1. Consider the following information(
&he direct-labor rate $ariance is( A . I 14 ,< . B. I,<4<<. C . I ,< 4<< =.
pounds at I,.< per pound hours at I4.< per hour
. &he direct-material ;uantit' $ariance is( A. I4<=. B. I4<. C . I2<<. . I4,<. %. none of the abo$e.
Answer( )*( &'pe( A
Actual direct labor hours @tandard direct labor hours &otal actual direct labor cost irect-labor efficienc' $ariance fa$orable
Cost standards for product no. C44( irect material irect labor
0<< <<< I,01<< I,<<
direct-material price $ariance is( I 0 2,< =. I02,<. I,<<=. I,<<. none of the abo$e.
Answer( )*( &'pe( A . &he A. B. C. . %.
direct-labor rate $ariance is( I 4 7<< =. I4:<=. I7<,<=. I7<<<. none of the abo$e.
I 4.< 4.<
I 4<,<< 2,4< ,:,4<
Answer( C )*( &'pe( A 2. &he direct-labor efficienc' $ariance is( A . I 7 << <=. B. I7<<<. C. I7,<=. . I7,<. %. none of the abo$e. Answer( )*( &'pe( A 4. &he standard hours allowed for the wor# performed are( A. . B. .10. C. :<<<. . 0<1<<. %. none of the abo$e. Answer( C )*( &'pe( A 7.
When considering whether to in$estigate a $ariance managers should consider all of the following ecept the $ariance6s( A. size. B. pattern of recurrence. C. trends o$er time. . nature namel' whether it is fa$orable or unfa$orable. %. controllabilit'.
%.
! ! ! an d ! !! .
Answer( )*( 0 &'pe( +C 01. A statistical control chart is best used for determining( A. direct-material price $ariances. B. direct-labor $ariances. C. whether a $ariance is fa$orable or unfa$orable. . who should be held accountable for specific $ariances. %. whether a particular $ariance should be in$estigated. Answer( % )*( 0 &'pe( +C 0,. &he indi$idual generall' responsible for the direct-material price $ariance is the( A. sales manager. B. production super$isor. C. purchasing manager. . finance manager. %. head of the human resources department. Answer( C )*( &'pe( +C 0. A production super$isor generall' has little influence o$er the( A. direct-material ;uantit' $ariance. B. direct-labor rate $ariance. C. direct-labor efficienc' $ariance. . direct-material price $ariance. %. number of units produced.
Answer( )*( 0 &'pe( +C Answer( )*( &'pe( 3 :. Which of the following combinations of direct-material $ariances might prompt management to underta#e a detailed $ariance in$estigation? A. /rice unfa$orableH ;uantit' unfa$orable. B. /rice unfa$orableH ;uantit' fa$orable. C. /rice fa$orableH ;uantit' unfa$orable. . /rice fa$orableH ;uantit' fa$orable. %. All of the abo$e.
00.
!n which department would an in$estigation normall' begin regarding an unfa$orable materials ;uantit' $ariance? A. Fualit' control. B . /u rc ha si ng . C. %ngineering. . /r od uc ti on . % . + ece i$ in g.
Answer( % )*( 0 &'pe( 3 Answer( )*( &'pe( +C 0<. Consider the following statements about $ariance in$estigation( 0. I. II. III.
ariance in$estigation in$ol$es a loo# at onl' unfa$orable $ariances. ariance in$estigation is t'picall' based on a cost-benefit anal'sis. ariance in$estigation is often performed b' establishing guidelines similar to the following( !n$estigate $ariances that are greater than IO or greater than L of standard cost.
Which of the abo$e statements is 8are9 true? A. ! onl'. B. !! onl'. C. !!! onl'. . ! ! a nd ! !! .
02.
Cohen Corporation has a fa$orable materials ;uantit' $ariance. Which department would li#el' be as#ed to eplain the cause of this $ariance? A. %ngineering. B . /u rc ha si ng . C . /r od uc ti on . . Ma r# et in g. %. 3one because the $ariance is fa$orable. Answer( C )*( &'pe( 3 +ogers !nc. had an unfa$orable labor efficienc' $ariance and an unfa$orable materials ;uantit' $ariance. Which department might be held accountable for these $ariances? A. /urchasing because bad materials can harm labor efficienc'.
B. C. . %.
/roduction because inefficient wor#ers ma' use more materials than allowed. /urchasing and>or production. M ar #e ti ng . @hi pping.
&he allo' produced more waste than normal as e$idenced b' a direct-material ;uantit' $ariance of I,<<< and was also difficult to use. &his slowed wor#er efficienc' generating a I,<< labor efficienc' $ariance. &o help remed' the situation the production manager used senior line emplo'ees which ga$e rise to a I:<< labor rate $ariance. !f o$erall product ;ualit' did not suffer what $ariance amount is best used in 5udging the appropriateness of the purchasing manager6s decision to ac;uire substandard material? A . I 0 1<< =. B . I<<<=. C . I4<<<=. . I 4 << =. % . I:<<=.
Answer( C )*( &'pe( 3 04.
A direct-material ;uantit' $ariance can be caused b' all of the following ecept( A. improper emplo'ee training. B. changes in sales $olume. C. ac;uisition of materials at a $er' attracti$e price. . ad5ustment problems with machines. %. disgruntled wor#ers.
Answer( A )*( &'pe( A 3 Answer( B )*( &'pe( 3 ,. 07. A direct-labor efficienc' $ariance cannot be caused b'( A. ineperienced emplo'ees. B. poor ;ualit' raw materials. C. emplo'ee inefficienc'. . an out-of-date labor time standard. %. producing fewer finished units than originall' planned. Answer( % )*( &'pe( 3 0:. Eustin Compan' recentl' purchased materials from a new supplier at a $er' attracti$e price. &he materials were found to be of poor ;ualit' and the compan'6s laborers struggled significantl' as the' shaped the materials into finished product. !n a desperation mo$e to ma#e up for some of the time l ost the manufacturing super$isor brought in more-senior emplo'ees from another part of the plant. Which of the following $ariances would ha$e a high probabilit' of arising from this situation? A. Material price $ariance fa$orable. B. Material ;uantit' $ariance unfa$orable. C. )abor rate $ariance unfa$orable. . )abor efficienc' $ariance unfa$orable. %. All of the abo$e.
1.
@tandard costs( A. allow a manager to assess the efficienc' of operations. B. allow a compan' to practice management b' eception. C. pro$ide management with a basis for performance e$aluations. . if set correctl' can pro$ide a moti$ational tool for emplo'ees. %. will pro$ide all of the abo$e benefits for a compan'.
Answer( % )*( 4 &'pe( +C 3 . Which of the following is a criticism of standard costing as applied to toda'6s manufacturing en$ironment? A. Automated manufacturing processes are $er' consistent in meeting production specifications ma#ing $ariances $er' small and relati$el' unimportant. B. ariance information is usuall' aggregated 8i.e. combined9 rather than associated with a particular batch of goods or a specific product line. C. &raditional standard costing fails to focus on #e' business issues such as customer ser$ice and bringing products to mar#et faster than the competition. . @tandard costing pa's considerable attention to labor cost and labor efficienc' which are becoming a relati$el' unimportant factor of production. %. All of the abo$e are $alid criticisms. Answer( % )*( 7 &'pe( +C
Answer( % )*( &'pe( 3 )isted below are fi$e $ariances 8and possible causes9 that are under re$iew b' management of no Compan'. Which of the following is least li#el' to cause the $ariance indicated? A. &he need to ship goods ac;uired from a distant supplier $ia =ed% rather than $ia truc#H material price $ariance. B. &he need to complete goods on a timel' basis during a period of high absenteeismH labor rate $ariance. C. A wor#-team that is $er' unhapp' with its super$isorH labor efficienc' $ariance. . &he need to close a plant for two da's because of blizzard conditionsH material ;uantit' $ariance part no. 0,. %. A malfunctioning piece of manufacturing e;uipmentH labor efficienc' $ariance.
0. Which of the following is not a $alid wa' to adapt standard cost s'stems to toda'6s manufacturing en$ironment? A. %mphasize material and o$erhead costs. B. se more non-traditional cost dri$ers such as number of setups or number of engineering change orders. C. pdate standards more fre;uentl' to ad5ust for the elimination of non-$alueadded costs. . se additional nonfinancial measures for performance e$aluation and control. %. e$ote more resources to the trac#ing of direct labor cost.
Answer( )*( &'pe( 3
.
)uc#' Corporation6s purchasing manager obtained a special price on an aluminum allo' from a new supplier resulting in a direct-material price $ariance of I:<<=.
Answer( % )*( 7 &'pe( +C &o assess how customers percei$e a compan'6s products management ma' stud'( A. the number of customer complaints. B. the number of warrant' claims. C. the number of products returned.
. %.
the cost of repairing returned products. all of the abo$e measures.
Answer( % )*( : &'pe( +C 2.
4.
&o impro$e its manufacturing efficienc' companies should stri$e toward increasing RRRRRRRRRR time as a percentage of processing time K inspection time K waiting time K mo$e time. &he blan# is( A. processing time. B. lead time. C. waiting time. . m o$e t ime . %. inspection time. Answer( A )*( : &'pe( +C !n the calculation of manufacturing c'cle efficienc' which of the following acti$ities results in $alue-added time? A. Mo$ing. B . / roc es si ng. C . ! ns pec ti on . . Waiting. %. All of the abo$e. Answer( B )*( : &'pe( +C
7. &he manufacturing c'cle efficienc' for /F+ Compan' when the processing time is si hours and inspection waiting and mo$e time are one hour each is( A. <.24. B. <.4. C. <.47. . <.77. %. an amount other than those shown abo$e. Answer( A )*( : &'pe( A :.
Which of the following would not be a concern of a compan' that desires to compete in a global manufacturing arena? A. 3umber of new products introduced. B. Manufacturing c'cle efficienc'. C. 3umber of customer complaints. . 3umber of on-time deli$eries. %. All of the abo$e would be concerns.
Answer( B )*( 1< &'pe( +C 21. &he t'pical balanced scorecard is best described as containing( A. financial performance measures. B. nonfinancial performance measures. C. neither financial nor nonfinancial performance measures. . both financial and nonfinancial performance measures. %. both financial and nonfinancial performance measures the latter often co$ering a broad range of perspecti$es such as customers internal operations and learning and growth. Answer( % )*( 1< &'pe( +C 2,. @wedish Cruise )ines 8@C)9 which operates in a $er' competiti$e mar#etplace is considering four categories of performance measures( 819 profitabilit' measures 8,9 customer-satisfaction measures 89 efficienc' and ;ualit' measures and 809 learning and growth measures. &he compan' assigns one manger to each ship in its fleet to o$ersee the ship6s general operations. !f @C) desired to adopt a balanced-scorecard approach which measures should the firm use in the e$aluation of its managers? A. 1. B. 1 ,. C. , . . 1 , 0. %. 1 , 0. Answer( % )*( 1< &'pe( 3 2. )ead indicators guide management to( A. ta#e actions now that will ha$e positi$e effects on organizational performance now. B. ta#e actions now that will ha$e positi$e effects on organizational performance in the future. C. ta#e actions in the future that will ha$e positi$e effects on organizational performance now. . ta#e actions in the past that will ha$e positi$e effects on organizational performance in the future. %. pursue identical strategies as those implemented with lag indicators. Answer( B )*( 1< &'pe( +C 20.
Answer( % )*( : &'pe( +C 2<.
An increasingl' popular approach that integrates financial and customer performance measures with measures in the areas of internal operations and learning and growth is #nown as( A. the integrated performance measurement tool 8!/M&9. B. the balanced scorecard. C. gain sharing. . c'cle efficienc'. %. o$erall ;ualit' assessment 8*FA9.
When using a balanced scorecard a compan'6s mar#et share is t'picall' classified as an element of the firm6s( A. financial performance measures. B. customer performance measures. C. learning and growth performance measures. . internal-operations performance measures. %. interdisciplinar' performance measures. Answer( B )*( 1< &'pe( +C
2.
When using a balanced scorecard which of the following is t'picall' classified as an internal-operations performance measure? A. Cash fl ow.
B. C. . %.
22.
3umber of customer complaints. %mplo'ee training hours. 3umber of emplo'ee suggestions. 3umber of suppliers used.
*n a$erage ,< good shel$es are completed during each hour. )aborers who wor# on these units are paid I1 per hour. +e;uired( &. istinguish between perfection standards and practical standards. '. Who within an organization would be in the best position to assist in setting( 1. the direct-material price standard? 2. the direct-material ;uantit' standard? 3. the direct-labor efficienc' standard? C. Calculate a practical direct-material and direct-labor standard for each good shelf produced.
Answer( % )*( 1< &'pe( +C Which of the following perspecti$es is influenced b' a compan'6s $ision and strateg'? A . = in an ci al . B. Customer. C. !nternal operations. . )earning and growth. %. All of the abo$e.
)*( , &'pe( A 3
Answer( % )*( 1< &'pe( +C 24. Which of the following 5ournal entries definitel' contains an error? A. +aw-Material !n$entor' irect-Material /rice ariance Accounts /a'able B. +aw-Material !n$entor' irect-Material /rice ariance Accounts /a'able C. +aw-Material !n$entor' irect-Material /rice ariance Wor#-in-/rocess !n$entor' . Wor#-in-/rocess !n$entor' irect-Material Fuantit' ariance +aw-Material !n$entor' %. Wor#-in-/rocess !n$entor' irect-Material Fuantit' ariance +aw-Material !n$entor'
A. ,<<<<< <<< 7<<<
4:<<<
Answer( C )*( 11 &'pe( 3 27.
At the end of the accounting period most companies close $ariance accounts to( A. +aw-Material !n$entor'. B. Wor#-in-/rocess !n$entor'. C. =inished-oods !n$entor'. . Cost of oods @old. %. !ncome @ummar'.
Answer( )*( 11 &'pe( +C E/E0CISES Setting a Standard
2:.
B.
1. ,. .
C.
irect materials( 0. poundsS I, per pound irect labor( <.< hoursS I1 &otal
12<<<
24<<< <<<
Clo$erleaf !nc. produces glass shel$es that are used in furniture. %ach shelf re;uires .2 pounds of raw material at a cost of I, per pound. nfortunatel' gi$en the nature of the manufacturing process one out of e$er' fi$e shel$es is chipped scratched or bro#en at the beginning of production and has to be scrapped.
Answer( /erfection standards or those achie$ed under nearl' perfect operating conditions assume pea# efficienc' at minimum cost. %mplo'ees are pushed to reach these ideal measures often becoming discouraged. /ractical standards on the other hand are high but attainable thus presenting a realistic target for personnel. @uch standards incorporate allowances for normal downtime and other t'pical inefficiencies. &he purchasing manager. &he production super$isor as well as production engineers. &he production super$isor as well as industrial engineers. I:.<< <.4 I:.4
Sirect materials( 8.2 9 P 0 N 0.H direct labor( 1 P ,< N <.< 1irect2Material Standards# %ariance 1ata 4<. iamond Corporation manufactures a $ariet' of li;uid lawn fertilizers including a $er' popular product called )ush 63 reen. ata about )ush 63 reen and /roctol a ma5or ingredient follow. Expected operations: /roctol is purchased in -gallon drums at a cost of I0 per drum. A ,L cash discount is offered for prompt pa'ment of in$oices and iamond ta#es ad$antage of all discounts offered. iamond normall' purchases ,<< drums of /roctol at a time pa'ing shipping fees of I0,< per shipment. %ach gallon of )ush 63 reen re;uires three ;uarts of /roctolH howe$er because of e$aporation and spills iamond loses 0L of all /roctol that enters production. 8+ecall that there are four ;uarts in a gallon.9 Actual operations: =or the period 5ust ended iamond purchased 1,<< drums of /roctol at a total cost of I0:2<. &here was no beginning in$entor' but an end-of period in$entor' re$ealed that 1 drums were still on hand. Manufacturing acti$it' output totaled 7,<<< gallons of )ush 63
reen. +e;uired( Compute the standard purchase price for one &. gallon of /roctol. Compute the standard ;uantit' of /roctol to be '. used in producing one gallon of )ush 63 reen. %press 'our answer in ;uarts. Compute the direct-material price $ariance for C. /roctol. Dow much /roctol was used i n manufacturing ). acti$it' and how much should ha$e been used? %press 'our answer in ;uarts. )*( , &'pe( A 3