Download Incremental analysis involves calculating the

Incremental analysis involves calculating the difference in revenue and difference in
costs between alternatives. (Points: 5) True False
2. Costs that do not increase or decrease due to a special order are never considered
incremental costs for the special order decision. (Points: 5) True False
3. Job-order costing can be used by service companies. (Points: 5) True False
4. When work is completed on a job, costs for the completed job are found in which of
the following accounts? (Points: 5) Raw Materials Inventory Work in Process Inventory
Finished Goods Inventory Cost of Goods Sold
5. Why is overhead applied using a predetermined overhead rate? (Points: 5) The actual
amount of overhead is not known until yearend and the company desires timely cost
information. The company desires to know the actual job costs during the year. A
company is unable to estimate its expected costs for the year. Overhead amounts cannot
be accurately determined since they include both fixed and variable components.
6. Mattling Brothers uses a predetermined overhead rate of $6.00 per direct labor hour.
Budgeted overhead was $720,000 and actual overhead incurred was $700,000. Actual
direct labor hours worked were 125,000 hours. How many labor hours did Mattling plan
to work when determining the overhead rate for the year? (Points: 5) 120,000 hours
116,667 hours 20,833 hours Cannot be determined from the information given.
7. Just-in-time (JIT) systems were first used in (Points: 5) England. the United States.
Japan. Germany.
8. If a company has zero beginning inventory and zero ending inventory (is completely
just-in-time), then which of the following is true? (Points: 5) Cost of goods sold will
equal cost of goods manufactured Cost of goods sold will be zero Cost of goods
manufactured will be zero All of the above
9. Total quality management (TQM) programs are also known as (Points: 5) just-in-time
programs. activity-based allocation programs. critical path programs. continuous quality
improvement programs.
10. MRC Company applies manufacturing overhead based on direct labor hours.
Information concerning manufacturing overhead and labor for July follows: How much is
the predetermined overhead rate? (Points: 5) $61.06 $4.30 $63.36 $62.16
11. When partially completed units are converted to a comparable number of completed
units, they are referred to as (Points: 5) converted units. split-off units. equivalent units.
equitable units.
12. Which of the following amounts is not needed in order to calculate the cost per
equivalent unit? (Points: 5) costs in beginning Work in Process inventory equivalent
units in beginning inventory. units completed and transferred out of the department
equivalent units in ending inventory
13. The ending Work in Process inventory in the mixing department contains 300 units
that are 30% complete with respect to labor costs. How many equivalent units are in the
ending inventory? (Points: 5) 300 70 210 90
14. For each period, the total cost that must be accounted for is the sum of (Points: 5)
costs in the beginning Work in Process inventory and costs in the ending Work in Process
inventory. all costs that were incurred during this period. costs in the beginning Work in
Process inventory and costs incurred during the period. costs transferred out of the
department and costs in the beginning Work in Process inventory.
15. The work in process inventory decreased from 1,832 units to 1,275 units during the
month. If 8,653 units were started during the month, how many units were transferred out
of the department? (Points: 5) 8,096 3,107 5,546 9,210
16. Total fixed costs remain the same when the level of activity changes within the
relevant range. (Points: 5) True False
17. Total cost equals fixed cost plus variable cost per unit times the activity level in units.
(Points: 5) True False
18. If the contribution margin ratio is 40%, it means that every $1.00 of sales will
contribute $0.40 to covering fixed costs and generating a profit. (Points: 5) True False
19. Step costs (Points: 5) are the same amount per unit for each range of volume. are
fixed for a range of volume but increase to a higher level when the upper bound of
the range is exceeded. are a different total amount at every level of activity. contain both
a variable cost element and a fixed cost element.
20. The high-low method calculates the variable cost per unit as the (Points: 5) difference
between fixed costs and total costs product of the number of units and the contribution
margin per unit. change in cost divided by the change in activity level for two points.
change in activity level divided by the change in cost for two points.
21. Happy Reading, a producer of children’s books, has provided the following
calculations: Selling price per unit $6.60 Contribution margin per unit $3.00 Total fixed
costs $46,200.00 What is the break-even point in books? (Points: 5) 20,790 15,400
12,833 7,000
22. Firms that have high operating leverage (Points: 5) have relatively high levels of
fixed cost. have production costs that are mostly variable. will have smaller changes in
profit when the activity level changes. are generally thought to be less risky.
23. When considering a process that involves a resource constraint, the optimal decision
(Points: 5) minimizes the break-even point. maximizes the contribution margin per
unit of the constraint. minimizes the contribution margin per unit of output. minimizes
total fixed costs.
24. Bjorni Inc. makes a single product, the Bjorn. Information for 2010 appears below:
Will income be higher under variable or full costing? (Points: 5) Variable. Full. They will
be the same. Cannot be determined.
25. T-Shirt Man is a direct marketer of popular t-shirts. Following is information about its
revenue and cost structure: Assume 400,000 t-shirts are produced and 350,000 are sold in
2011. What is income under variable costing? (Points: 5) $975,000 $1,400,000 $850,000
$2,250,000
26. In the direct method of allocating costs, service department costs are allocated only to
other service departments, not to the production departments. (Points: 5) True False
27. A grouping of individual costs whose total is allocated using one allocation base is
called a (Points: 5) cost objective. cost pool. direct cost. sunk cost.
28. The overriding concern in forming a cost pool is to ensure that (Points: 5) there are no
variable costs in the cost pool. the total amount in the cost pool is less than the direct
costs for the product. only costs which have been budgeted are included in the cost pool.
the costs in the pool are homogeneous or similar.
29. The method of allocation which allocates service department costs to production
departments but not to other service departments is called the (Points: 5) equity method.
direct method. reciprocal method. sequential or step method.
30. An allocation of a predetermined amount that is not affected by changes in the
activity level of the organizational unit receiving the allocation is called a(n) (Points: 5)
allocation base. unitized cost. lump-sum allocation. cost driver.
31. Opportunity costs represent the benefits foregone by selecting one alternative over
another. (Points: 5) True False
32. Improving performance in areas which are not bottlenecks will not improve overall
output. (Points: 5) True False
33. Which of the following is never considered in incremental analysis? (Points: 5)
Incremental revenue Sunk costs Incremental profit Differential costs
34. A disadvantage of using an outside supplier is that (Points: 5) they may be able to
produce a component at a lower cost. there is a loss of control over the production
process. there may be an opportunity to expand other parts of the company. the supplier
assumes some of the risk of a downturn in business activity.
35. Inspections should be conducted (Points: 5) after the process with the binding
constraint. during the process with the binding constraint. before the process with the
binding constraint. without regard to the binding constraint.
36. Depreciation itself is not a cash flow, but it reduces the amount of taxes that a
company must pay. (Points: 5) True False
37. Which of the following techniques uses time value of money concepts? (Points: 5)
Payback method. Internal rate of return. Accounting rate of return. Relative sales value
method.
38. The Higston Company has just purchased a piece of equipment at a cost of $500,000.
This equipment will reduce operating costs by $100,000 each year for the next eight
years. This equipment replaces old equipment that was sold for $10,000 cash. Ignoring
income taxes, the new equipments has a pay-back period of: (Points: 5) 4.9 years. 5 years.
5.1 years. 4.8 years.
39. Using an interest rate of 14%, how much is the present value of $800,000 to be
received in 15 years? (Points: 5) $112,080 $58,481 $533,334 $746,666
40. An investment of $700,000 is expected to generate the following cash flows: What is
the investment’s payback period? (Points: 5) 7 years 5 years 3 years 4 years
41. If the number of units produced equals the number of units sold, the number of units
in ending inventory will equal the number of units in beginning inventory. (Points: 5)
True False
42. Any significant deviation from planned performance is associated with managers
doing a good or poor job managing operations. (Points: 5) True False
43. A method of budget preparation that requires all budgeted amounts to be justified by
the department, even if the amounts were supported in prior periods, is called (Points: 5)
variance budgeting. flexible budgeting. current period budgeting. zero base budgeting.
44. In general, unfavorable material variances arise from (Points: 5) using more material
than planned. paying a higher price than planned. Both A and B are correct. None of the
above is correct.
45. The material price variance uses the quantity of material _____, while the material
quantity variance uses the quantity of material _____. (Points: 5) purchased, used used,
budgeted budgeted, wasted wasted, purchased
46. The material price variance is the difference between actual price per unit and
standard price per unit times the (Points: 5) quantity of material on order with suppliers.
standard quantity of material to be purchased for this level of production. actual quantity
of material purchased. budgeted quantity of material to be purchased.
47. The overhead volume variance is favorable when (Points: 5) more units are
produced than were originally planned. actual overhead costs are less than the flexible
budget. the predetermined overhead rate was set too low. there are units remaining in
ending inventory.
48. Which of the following variances is most likely to be the responsibility of the
purchasing manager? (Points: 5) Labor efficiency variance. Labor rate variance. Material
price variance. Overhead volume variance.
49. Alpine Company's sales are all on account. History indicates that sales will be
collected as follows: How much are total budgeted cash collections during May? (Points:
5) $144,000 $339,000 $319,000 $343,000
50. A suit company has the following standards to make one suit: The company
purchased 4,000 yards of material in March for $40,000. The company used 3,900 yards
in March in order to make 900 suits. How much is the direct materials price variance?
(Points: 5) $2,000 unfavorable $2,850 unfavorable. $1,950 unfavorable. $4,850
unfavorable.
51. Transfer prices should represent the opportunity costs of the transferred item. (Points:
5) True False
52. If managers are evaluated using return on investment, they may hesitate to invest in
new equipment because it may result in a lower return on investment. (Points: 5) True
False
53. Which of the following methods of setting a transfer price most closely reflects an
arm’s-length, independent transaction? (Points: 5) Negotiated price. Variable cost.
Market price. Full-cost plus profit.
54. The balanced scorecard challenges managers to: (Points: 5) focus on the single most
important measure to the company. perform on a variety of dimensions simultaneously.
look forward as well as backward. Both B and C.
55. Bradstreet is a division of Kindling Products, Inc. For the most recent year, Bradstreet
had net income of $16,000,000. Included in income was interest expense of $1,200,000.
The operation’s tax rate is 40 percent. Total assets of Bradstreet are $225,000,000,
current liabilities are $40,000,000, and $35,000,000 of the current liabilities are
noninterest-bearing. How much is return on investment for Bradstreet? (Points: 5) 8.0%
8.8% 9.1% 7.4%