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1. Question : (TCO 1) The average cost data are for In-Sync Fixtures Company's (a retailer) only two product lines,
Marblette and Italian MarbleCurrently, In-Sync Fixtures uses a traditional costing system with indirect costs
allocated using purchased cost of goods as a basis. In-Sync Fixtures is considering refining the allocation of its
receiving costs of $40,000. It realizes that the Italian Marble is heavier and requires more care than the Marblette but
that the Marblette comes in larger volume. Which statement can be made using the results of the activity analysis
performed.?
2. Question : (TCO 1) The allocation of indirect costs in an activity-based costing system
3. Question : (TCO 1) Evaluating customer reaction of the trade-off of giving up some features of a product for a
lower price would best fit which category of management decisions under activity-based management?
4. Question : (TCO 1) A company produces three products; if one product is overcosted then
5. Question : (TCO 1) To set realistic selling prices
6. Question : (TCO 1) Different products consume different proportions of manufacturing overhead costs because
of differences in all of
7. Question : (TCO 1) A well-designed, activity-based cost system helps managers make better decisions because
information derived from an ABC
8. Question : (TCO 1) Companies use ABC system information to
9. Question : (TCO 1) For service organizations that bill customers at a predetermined average rate, activity-based
cost systems can help to
10. Question : (TCO 1) Danielle Company produces a special spray nozzle. The budgeted indirect total cost of
inserting the spray nozzle is $180,000. The budgeted number of nozzles to be inserted is 60,000. What is the
budgeted indirect cost allocation rate for this activity?
collectible, 60% are collected in the month of sale and the remainder in the month........
(Version 2)
1. Question : (TCO 2) Benchmarking is
2. Question : (TCO 2) To gain the benefits of budgeting, ________ must understand and support the budget.
3. Question : (TCO 2) Which budget is not necessary to prepare the budgeted balance sheet?
4. Question : (TCO 2) A flexible budget
5. Question : (TCO 2) An unfavorable variance indicates that
6. Question : (TCO 2) Which of the following statements is true about overhead cost variance analysis using
activity-based costing?
7. Question : (TCO 2) Overhead costs have been increasing due to all of the following except
8. Question : (TCO 2) Katie Enterprises reports the year-end information from 20X8 as follows: Sales (70,000
units) $560,000; Cost of goods sold 210,000; Gross margin 350,000; Operating expenses 200,000; Operating
income $150,000. Katie is developing the 20X9 budget. In 20X9,..........?
9. Question : (TCO 2) Hester Company budgets on an annual basis for its fiscal year. The following beginning and
ending inventory levels (in units) are planned for the fiscal year of July 1, 2008, through June 30, 2009.
of units it would have to manufacture during the year would be
10. Question : (TCO 2) Information pertaining to Brenton Corporation's sales revenue is presented in the following
table: .Management estimates that 5% of credit sales are not collectible. Of the credit sales that are
collectible, 60% are collected in the month of sale...........
manufacturing company that has multiple products and multiple machines. One way the company can overcome the
bottleneck is
$6,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year. What amount of interest costs
should be allocated to the electric lamp division?
6. Question : (TCO 10) All of the following are methods that aid management in analyzing the expected results of
capital budgeting decisions EXCEPT the
7. Question : (TCO 10) Assume your goal in life is to retire with $1.5 million. How much would you need to save
at the end of each year if interest rates average 5% and you have a 25-year work life?
8. Question : (TCO 10) The definition of an annuity is
9. Question : (TCO 10) A "what-if" technique that examines how a result will change if the original predicted data
are not achieved or if an underlying assumption changes is called
10. Question : (TCO 10) Shirt Company wants to purchase a new cutting machine for its sewing plant. The
investment is expected to generate annual cash inflows of $300,000. The required rate of return is 12% and the
current machine is expected to last for four years. What is the maximum dollar amount Shirt Company would be
willing to spend for the machine, assuming its life is also four years? Income taxes are not considered.
inserting the spray nozzle is $80,000. The budgeted number of nozzles to be inserted is 40,000. What is the budgeted
indirect cost allocation rate for this activity?
5. Question: (TCO 3) Which cost estimation method analyzes accounts in the subsidiary ledger as variable, fixed,
or mixed using qualitative methods?
6. Question: (TCO 4) In evaluating different alternatives, it is useful to concentrate on
7. Question: (TCO 5) The theory of constraints is used for cost analysis when
8. Question: (TCO 5) Schmidt Corporation produces a part that is used in the manufacture of one of its products.
The costs associated with the production of 10,000 units of this part are as follows:..midt Corporation
for $18 per unit. Assuming there is no other use for the facilities, Schmidt should
9. Question: (TCO 3) The cost function y = 100 + 10X
10. Question: (TCO 4) Sunk costs
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1. Question : (TCO 1) For each of the following drivers identify an appropriate activity. a. # of machines b. # of
setups c. # of inspections d. # of orders e. # of runs f. # of bins or aisles g. # of engineers
2. Question : (TCO 2) Favata Company has the following information:In addition, the cost of goods
sold rate is 70% and the desired inventory level is 30% of next month's cost of sales. Prepare a purchases budget for
July through September.
3. Question : (TCO 3) Patrick Ross, the president of Ross's Wild Game Company, has asked for information about
the cost behavior of manufacturing overhead costs. Specifically, he wants to know how much overhead cost is fixed
and how much is variable. The following data are the only records available:Using the high-low
method, determine the overhead cost equation. Use machine-hours as your cost driver.
4. Question : (TCO 5) Kirkland Company manufactures a part for use in its production of hats. When 10,000 items
are produced, the costs per unit are: . units of the part for $6.00 per unit. The plant facilities could be used
to manufacture another item at a savings of $9,000 if Kirkland accepts the offer. In addition, $1.00 per unit of fixed
manufacturing overhead on the original item would be eliminated. a. What is the relevant per unit cost for the
original part? b. Which alternative is best for Kirkland Company? By how much?
5. Question : (TCO 1) For each of the following drivers identify an appropriate activity. a. # of machines b. # of
setups c. # of inspections d. # of orders e. # of runs f. # of bins or aisles g. # of engineers
6. Question : (TCO 2) Favata Company has the following information: In addition, the cost of goods
sold rate is 70% and the desired inventory level is 30% of next month's cost of sales. Prepare a purchases budget for
July through September.
7. Question : (TCO 3) Patrick Ross, the president of Ross's Wild Game Company, has asked for information about
the cost behavior of manufacturing overhead costs. Specifically, he wants to know how much overhead cost is fixed
and how much is variable. The following data are the only records available: Using the high-low
method, determine the overhead cost equation. Use machine-hours as your cost driver.
8. Question : (TCO 5) Kirkland Company manufactures a part for use in its production of hats. When 10,000 items
are produced, the costs per unit are: Mike Company has offered to sell to Kirkland Company 10,000 units
of the part for $6.00 per unit. The plant facilities could be used to manufacture another item at a savings of $9,000 if
Kirkland accepts the offer. In addition, $1.00 per unit of fixed manufacturing overhead on the original item would be
eliminated. a. What is the relevant per unit cost for the original part? b. Which alternative is best for Kirkland
Company? By how much?
1. Question : (TCO 1) Which of the following is a sign that an ABC system may be useful?
2. Question : (TCO 1) Merriamn Company provides the following ABC.....:........How much of the account billing
cost will be assigned to Department B?
3. Question : (TCO 2) Budgeting provides all of the following EXCEPT
4. Question : (TCO 2) White planned to use $82 of material per unit but actually used $80 of material per unit, and
planned to make 1,200 units but actually made 1,000 units. The flexible-budget variance is
5. Question : (TCO 3) The conference method estimates cost functions
6. Question : (TCO 4) In evaluating different alternatives, it is useful to concentrate on
7. Question : (TCO 5) Producing more nonbottleneck output
8. Question : (TCO 5) Schmidt Corporation produces a part that is used in the manufacture of one of its products.
The costs associated with the production of 10,000 units of this part are as follows: ..
Phil Company has offered to sell 10,000 units of the same part to Schmidt Corporation for $18 per unit. Assuming
there is no other use for the facilities, Schmidt should
9. Question : (TCO 3) The cost components of an air conditioner include $35 for the compressor, $11.50 for the
sheet-molded compound frame, and $80 per unit for assembly. The factory machines and tools cost is $55,000. The
company expects to produce 1,500 air....... What cost function best represents these costs?
10. Question : (TCO 1) For each of the following activities, identify an appropriate activity-cost driver. a. machine
maintenance b. machine setup c. quality control d. material ordering e. production scheduling f. warehouse expense
g. engineering design
11. Question : (TCO 2) Lubriderm Corporation has the following budgeted sales for the next six-month period
Prepare a purchases budget in pounds for July, August, and September, and give total purchases in both
pounds and dollars for each month.
12. Question : (TCO 3) As part of his job as cost analyst, Max Thompson collected the following information
concerning the operations of the Machining Department: .Use the high-low method to determine the
estimating cost function with machine-hours as the cost driver.
13. Question : (TCO 5) Collier Bicycles has been manufacturing its own wheels for its bikes. The company is
operating at 100% capacity, and variable manufacturing overhead is charged to production at the rate of 30% of
direct labor cost. The direct materials and direct labor cost per unit to make the wheels are $1.50 and $1.80,
respectively. Normal production is 200,000 wheels per year. A supplier offers to make the wheels at a price of $4
each. If the bicycle company accepts this offer, all variable manufacturing costs will be eliminated, but the $42,000
of fixed manufacturing overhead being charged to the wheels will have to be absorbed by other products. a. Prepare
an incremental analysis for the decision to make or buy the wheels. b. Should Collier Bicycles buy the wheels from
the outside supplier? Justify your answer.
14. Question : (TCO 1) For each of the following activities, identify an appropriate activity-cost driver. a. machine
maintenance b. machine setup c. quality control d. material ordering e. production scheduling f. warehouse expense
g. engineering design
15. Question : (TCO 2) Lubriderm Corporation has the following budgeted sales for the next six-month period
.. Prepare a purchases budget in pounds for July, August, and September, and give total purchases
in both pounds and dollars for each month.
16. Question : (TCO 3) As part of his job as cost analyst, Max Thompson collected the following information
concerning the operations of the Machining Department: Observation Machine-hours Total Operating Costs January
4,000 $45,000 February 4,600 49,500 March 3,800 45,750 April 4,400 48,000 May 4,500 49,800 Use the high-low
method to determine the estimating cost function with machine-hours as the cost driver.
17. Question : (TCO 4) Sunk costs Answer; Are past costs.
20. (TCO 10) A "what-if" technique that examines how a result will change if the original predicted data are not
achieved or if an underlying assumption changes is called (Points : 5)
21. (TCO 10) Shirt Company wants to purchase a new cutting machine for its sewing plant. The investment is
expected to generate annual cash inflows of $500,000. The required rate of return is 12% and the current machine is
expected to last for four years. What is the maximum dollar amount Shirt Company would be willing to spend for
the machine, assuming its life is also four.. (Points : 5)
22. (TCO 11) The four cost categories in a cost of quality program are (Points : 5)
23. (TCO 11) Regal Products has a budget of $900,000 in 20X6 for prevention costs. If it decides to automate a
portion of its prevention activities, it will save $60,000 in variable costs. The new method will require $18,000 in
training costs and $120,000 in annual equipment costs. Management is willing to adjust the budget for an amount up
to the cost of the new equipment. The budgeted production level is 200,000 units. Appraisal costs for the year are
budgeted at $600,000. The new prevention procedures will save appraisal costs of $30,000. Internal failure.
? (Points : 5)
24. (TCO 12) The costs associated with storage are an example of which..? (Points : 5)
25. (TCO 12) Liberty Celebrations, Inc., manufactures a line of flags. The annual demand for its flag display is
estimated to be 100,000 units. The annual cost of carrying one unit in inventory is $1.60, and the cost to initiate a
production run is $100. There are no flag displays on hand but Liberty had scheduled 70 equal production runs of
the display sets for the coming. (Points : 5)
26. (TCO 2) Russell Company has the following projected account balances for June 30, 20X9:
.Prepare a budgeted income statement AND a budgeted balance sheet as of June 30,
20X9. (Points : 25)
27. (TCO 5) Steven's Medical Equipment Company manufactures hospital beds. Its most popular model, Deluxe,
sells for $5,000. It has variable costs totaling $2,800 and fixed costs of $1,000 per unit, based on an average
production run of 5,000 units. It normally has four production runs a year, with $600,000 in setup costs each time.
Plant capacity can handle up to six runs a year for a total of 30,000 beds. A competitor is introducing a new hospital
bed similar to Deluxe that will..? (Points : 25)
28. (TCO 7) Dulce Greeting Cards Incorporated is starting a new business venture and is in the process of
evaluating its product lines. Information for one new product, traditional parchment grade cards, is as follows: For
16 times each year, a new card design will be put into production. Each new design will require $300 in setup costs.
The parchment grade card product line incurred $75,000 in development costs and is expected to be produced over
the next four years. (Points : 25)
29. (TCO 8) Novacar Company manufactures automobiles. The red car division sells its red cars for $25,000 each to
the general public. The red cars have manufacturing costs of $12,500 each for variable and $5,000 each for fixed
costs. The division's total fixed manufacturing costs are $25,000,000 at the normal volume of 5,000 units.
. (Points : 25)
30. (TCO 11) For supply item LK, Boatman Company has been ordering 125 units based on the recommendation of
the salesperson who calls on the company monthly. The company has hired a new purchasing agent, who wants to
start using the economic-order-quantity method and its supporting decision elements. She has gathered the following
information:Determine the EOQ, average inventory, orders per year, average daily demand, reorder
point, annual ordering costs, and annual carrying costs. (Points : 25)