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INSTANT DOWNLOAD COMPLETE TEST BANK WITH ANSWERS
Cornerstones Cost Management 2nd Edition By Hansen Mowen – Test Bank
SAMPLE QUESTIONS

 

Chapter 1–Introduction to Cost Management

Student: ___________________________________________________________________________

  1. An accounting information system collects, records, summarizes, analyzes, and manages data to transform inputs into information that is provided to users.
    True    False

 

  1. The two major subsystems of the accounting information system are the financial accounting information system and the cost management accounting information system.
    True    False

 

  1. The cost management information system is primarily concerned with producing outputs for external users.
    True    False

 

  1. The three broad objectives of financial accounting information systems are to provide information for costing out services and products, planning and control, and decision making.
    True    False

 

  1. Preparing reports for division managers is an activity associated with the cost management information system.
    True    False

 

  1. The cost management information system has two major subsystems: the cost accounting information system and the operational control information system.
    True    False

 

  1. Changes in the way business is conducted worldwide have broadened the focus of cost management accounting systems.
    True    False

 

  1. One of the major advances in information technology that affects firms is the emergence of electronic commerce.
    True    False

 

  1. The service sector of the U. S. economy has decreased in importance as traditional industries have declined in importance.
    True    False

 

  1. Enterprise resource planning (ERP) software has the objective of providing an integrated system capability and is able to run all the operations of a company.
    True    False

 

  1. In just-in-time (JIT) manufacturing, each operation produces only what is necessary for the succeeding operations.
    True    False

 

  1. JIT is a critical part of a more comprehensive approach referred to as Lean Manufacturing.
    True    False

 

  1. The focus of Lean Manufacturing is to eliminate waste, which is anything that does not add value to the end user (customer).
    True    False

 

  1. The role of cost and management accountants is one of support and teamwork and assistance of those who are responsible for achieving a company’s basic objectives.
    True    False

 

  1. Positions that have direct responsibility for basic objectives are referred to as staff positions, and those indirectly responsible are called line positions.
    True    False

 

  1. The Controller of a company supervises all the accounting departments and is often viewed as a member of the top management team.
    True    False

 

  1. The Treasurer of a company is responsible for all taxation activities, including dealing with the IRS.
    True    False

 

  1. Evaluating the performance of a segment of the company is an example of planning.
    True    False

 

  1. The process of choosing among competing alternatives is called decision making.
    True    False

 

  1. Business ethics is learning what is right or wrong in the work environment and choosing what is right.
    True    False

 

  1. Employee and customer loyalty are NOT a result of strong codes of ethics.
    True    False

 

  1. Firms subject to the Sarbanes-Oxley Act of 2002 do not have to disclose whether they have a code of ethics for senior financial officers, nor why.
    True    False

 

  1. The Institute of Management accountants has established ethical standards for management accountants.
    True    False

 

  1. In resolving an ethical conflict, it would be appropriate to take the matter to the press where there’s no legal requirement.
    True    False

 

  1. Divulging company information when not legally obligated to do so violates the confidentiality part of the IMA Code of Conduct.
    True    False

 

  1. Three of the major certifications available to management accountants are Certificates in Management Accounting, Public Accounting, and Internal Auditing.
    True    False

 

  1. For each certification, all an applicant has to do is meet specific educational and experience requirements.
    True    False

 

  1. The examination for obtaining the Certificate in Management Accounting consists of two parts: (1) Financial Planning, Performance and Control, and (2) Financial Decision Making.
    True    False

 

  1. The Certificate of Public Accounting does not include the right to serve as external auditors.
    True    False

 

  1. The Certified Internal Auditor must pass a comprehensive examination designed to ensure technical competence and have two years’ work experience.
    True    False

 

  1. The __________ information system is primarily concerned with producing outputs for internal users using inputs and processes needed to satisfy management objectives.
    ________________________________________

 

  1. The cost management subsystem designed to assign costs to individual products and services is called the __________ information system.
    ________________________________________

 

  1. __________ is the persistent pursuit and elimination of waste which results in the decrease of lead time.
    ________________________________________

 

  1. The __________ is a method used to continuously improve manufacturing and nonmanufacturing activities.
    ________________________________________

 

  1. The role of __________ accountants is to assist and support those responsible for carrying out an organization’s basic objectives.
    ________________________________________

 

  1. Positions in a company that have direct responsibility for its basic objectives are called __________ positions, and the positions indirectly responsible for the company’s objectives are called __________ positions.
    ________________________________________

 

  1. The standards of ethical conduct for management accountants include competence, confidentiality, integrity, resolution of ethical conflict, and __________ .
    ________________________________________

 

  1. Companies with a strong __________ can benefit from strong customer and employee loyalty.
    ________________________________________

 

  1. The IMA’s program to recognize professional competence in the field of management accounting yields a designation as a __________ Accountant.
    ________________________________________

 

  1. Only Certified Public Accountants are permitted by law to serve as __________ .
    ________________________________________

 

  1. In an accounting information system, the inputs are usually
    A. financial statements.
    B. analyzing data.
    C. performance reports.
    D. economic events.

 

  1. In an accounting information system, which of the following is NOT a transformational process?
    A. collecting data
    B. analyzing data
    C. performance reporting
    D. summarizing data

 

  1. Which of the following is NOT a process associated with an accounting information system?
    A. auditing existing data
    B. collecting and recording data
    C. providing information to users
    D. analyzing and managing data

 

  1. _______________ is devoted to providing information for external users.
    A. Management accounting
    B. Financial accounting
    C. Internal accounting
    D. Cost accounting

 

  1. Financial accounting information is used for
    A. investment decisions.
    B. regulatory measures.
    C. stewardship evaluation.
    D. all of the above.

 

  1. Which of the following does NOT describe cost management system?
    A. evaluation of segments or products within the firm
    B. emphasis on the future
    C. externally focused
    D. focus on effective use of resources

 

  1. Which of the following is NOT part of the financial accounting information system?
    A. filing reports with the SEC
    B. reporting a large contingent liability to current and potential shareholders
    C. determining the future cash flows of a proposed flexible manufacturing system
    D. preparing GAAP financial statements

 

  1. Cost management reports are prepared
    A. to meet the needs of decision makers within the firm.
    B. whenever stockholders request them.
    C. according to guidelines prepared by the Securities and Exchange Commission.
    D. according to financial accounting standards.

 

  1. Which of the following is NOT provided by cost accountants?
    A. cost information in accordance with GAAP
    B. cost information about processes and activities
    C. financial information for external users
    D. cost information about products, customers, and services

 

  1. The primary objective of the cost management information system is to provide
    A. stockholders and potential investors with useful information for decision making.
    B. banks and other creditors with information useful in making credit decisions.
    C. management with information useful for planning and control of operations.
    D. the Internal Revenue Service with information about taxable income.

 

  1. The cost management information system is concerned with
    A. reporting financial information according to GAAP.
    B. providing cost information that is used in planning, control, and decision-making.
    C. reporting to external users.
    D. providing financial information to investors.

 

  1. Cost accounting
    A. is concerned with assigning costs to various cost objects.
    B. attempts to satisfy the costing objectives of both financial accounting and management accounting.
    C. provides cost information that supports planning, controlling, and decision making.
    D. all of these.

 

  1. Cost management is the branch of accounting concerned with reporting to
    A. internal managers.
    B. stockholders.
    C. the government.
    D. bankers.

 

  1. _______________ broadens the focus of accounting because it is concerned with factors that drive costs, such as cycle time and process productivity.
    A. Cost accounting
    B. Cost management
    C. Financial management
    D. Financial accounting

 

  1. Which of the following activities is NOT associated with the cost management information system?
    A. preparing a cost of quality report
    B. preparing a performance report that compares actual costs to budgeted costs
    C. determining the cost of a customer
    D. using future expected earnings to estimate the price of a share of common stock

 

  1. Which of the following costing activities is associated with the financial accounting system?
    A. determining the cost of a department
    B. determining the cost of goods sold for financial statements
    C. preparing budgets
    D. determining the cost of a customer

 

  1. Which of the following activities is associated with the cost management information system?
    A. preparing reports for division managers
    B. preparing reports for the IRS
    C. preparing reports for the SEC
    D. preparing financial statements that conform to GAAP

 

  1. The operational control system is concerned with
    A. investment decisions.
    B. what activities should be performed and assessing how well they are performed.
    C. consumption of productive resources by individual products.
    D. none of these.

 

  1. Which of the following activities is NOT associated with the financial accounting information system?
    A. reporting on the cost of quality
    B. reporting to the SEC
    C. preparing reports for the IRS
    D. preparing a statement of cash flows

 

  1. Which of the following is a cost management subsystem designed to assign costs to individual products and services and other objects, as specified by management
    A. financial accounting information system
    B. operational control system
    C. cost accounting information system
    D. all of the above

 

  1. Which of the following statements is TRUE?
    A. The service sector comprises approximately three quarters of the United States’ economy and employment.
    B. The service sector comprises approximately 20 percent of the United States’ economy and employment.
    C. Traditional smokestack industries have increased in importance in recent years.
    D. The service sector has decreased in importance in recent years.

 

  1. Any form of commerce that is executed using information and communications technology is called:
    A. ERP
    B. OLAP
    C. electronic commerce
    D. DSS

 

  1. Factors that have led to a global market for manufacturing and service firms are
    A. improved transportation and communications systems.
    B. improved telemarketing and communications.
    C. improved telemarketing and transportation systems.
    D. None of these factors have contributed.

 

  1. Which of the following cost management tools supports the firm’s concentration on the delivery of value to the customer?
    A. service industry growth
    B. global competition
    C. preparing an earnings report for the SEC
    D. value-chain analysis

 

  1. A computerized information system that strives to input data once and make it available to people across the company for different purposes is called a(n):
    A. cost management information system
    B. enterprise resource planning system
    C. internal accounting system
    D. financial accounting system

 

  1. Which of the following is NOT an advance in information technology that affects firms?
    A. computer integrated applications
    B. GAAP reporting
    C. emergence of electronic commerce
    D. availability of tools such as OLAP and DSS

 

  1. Software that has integrated system capability using real time data is
    A. enterprise resource planning software.
    B. on-line analytic programs.
    C. computer-assisted engineering software.
    D. none of these.

 

  1. The increased importance of costing activities in the value chain and determining the cost of different suppliers and customers has led to the emergence of
    A. OLAP.
    B. EDI and supply chain management.
    C. CAM.
    D. theory of constraints.

 

  1. Which of the following activities is NOT significant to the advancement of information technology?
    A. enterprise resource planning software
    B. emergence of electronic commerce
    C. theory of constraints
    D. decision support systems

 

  1. Manufacturing environment automation is associated with increases in
    A. inventory.
    B. productive capacity.
    C. processing time.
    D. none of these.

 

  1. Which of the following approaches have led to advancements in the manufacturing environment?
    A. theory of constraints
    B. computer-integrated manufacturing
    C. JIT manufacturing
    D. all of these

 

  1. In JIT manufacturing, each operation produces
    A. only what is necessary for the succeeding operations.
    B. all that it can to offset fixed costs.
    C. a fixed percentage in excess of orders to ensure adequate quality stock.
    D. all that it can in order to build inventories.

 

  1. JIT is a critical part of a more comprehensive approach referred to as:
    A. supply chain management
    B. lean manufacturing
    C. just-in-time manufacturing
    D. computer-integrated manufacturing

 

  1. Which of the following are results of Lean Manufacturing?
    A. elimination of waste
    B. decreased lead time
    C. costs decrease
    D. all of the above

 

  1. Which of the following emerging trends in cost accounting deals with managers striving to create an environment that will enable workers to manufacture perfect (zero-defect) products?
    A. advances in information technology
    B. time as a competitive element
    C. global competition
    D. total quality management

 

  1. Competitive advantage is established by providing
    A. more customer products than competitors.
    B. better quality than competitors.
    C. greater customer value for less cost than competitors.
    D. greater efficiencies than competitors.

 

  1. Which of the following activities is NOT associated with new product development?
    A. life-cycle costing
    B. target costing
    C. activity-based management
    D. performance reports

 

  1. Total quality management emphasizes
    A. zero defects.
    B. continual improvement.
    C. elimination of waste.
    D. all of these.

 

  1. Cost management information systems further competitive advantage by supporting three fundamental organizational goals. Which of the following is NOT one of these fundamental organizational goals that further competitive advantage?
    A. improved time-based performance
    B. improved quality of products and services
    C. maximizing shareholder value
    D. improved efficiency

 

  1. Which of the following statements is NOT true about world-class firms?
    A. World-class firms are firms that are poor in customer support.
    B. World-class firms know their market and their products.
    C. World-class firms strive continually to improve product design, manufacture, and delivery.
    D. World-class firms can compete with the best of the best in a global environment.

 

  1. Improvement in time performance is most likely NOT enhanced by
    A. redesign of products.
    B. adding processes in production.
    C. eliminating waste.
    D. eliminating non-value-added activities.

 

  1. A critical measure of efficiency is
    A. the cost of activity.
    B. a T-test.
    C. customer satisfaction.
    D. employee job satisfaction.

 

  1. Today’s cost managers must assemble cost information and determine how to value things. Which methods would NOT be critical to achieving this?
    A. foreign currency translation
    B. costing and quality analysis
    C. differentiating between value-added and non-value-added activities
    D. measuring productivity

 

  1. A person in a staff position
    A. is directly involved in production.
    B. provides support for the line function.
    C. is not actually an employee of the company.
    D. all of these.

 

  1. The internal auditor performs a
    A. line function.
    B. staff function.
    C. production function.
    D. marketing function.

 

  1. Which of the following is a staff position?
    A. vice president of production
    B. vice president of finance
    C. vice president of marketing
    D. plant foreman

 

  1. Which of the following positions would most likely be a line manager?
    A. personnel department manager
    B. production supervisor
    C. treasurer
    D. purchasing department manager

 

  1. Which of the following job positions is a line function?
    A. financial vice president
    B. controller
    C. production supervisor
    D. treasurer

 

  1. All of the following would be considered staff functions EXCEPT the
    A. vice president of finance.
    B. vice president of corporate planning.
    C. vice president of marketing.
    D. vice president of research and development.

 

  1. Which of the following positions would most likely be a staff manager?
    A. manager of a Sears store
    B. president
    C. manager of a clothing division
    D. controller

 

  1. Which of the following would be considered a line function?
    A. production
    B. maintenance
    C. public relations
    D. administrative services

 

  1. Which of the following job positions is a staff position?
    A. controller
    B. production vice president
    C. production supervisor
    D. assembly foreman

 

  1. Accounting activities within an organization are usually under the overall supervision of the
    A. Certified Public Accountant.
    B. controller.
    C. Chartered Accountant.
    D. treasurer.

 

  1. The chief accounting officer of an organization is the
    A. vice president of finance.
    B. internal auditor.
    C. treasurer.
    D. controller.

 

  1. Which of the following is the officer responsible for money management and serves chiefly as the custodian of the organization’s funds?
    A. Certified Public Accountant
    B. controller
    C. Chartered Accountant
    D. treasurer

 

  1. Which of the following duties is usually assigned to the controller?
    A. receiving, maintaining custody of, and disbursing monies and securities
    B. directing the granting of credit to clients
    C. investing the organization’s funds
    D. tax planning

 

  1. Currently, the activity found LEAST often within the controller’s department is
    A. updating the general ledger.
    B. budget preparation.
    C. maintaining accounts receivable records.
    D. establishing and maintaining a market for the organization’s debt and equity securities.

 

  1. The setting of objectives and the identification of methods to achieve those objectives is called
    A. planning.
    B. controlling.
    C. performance evaluation.
    D. decision making.

 

  1. Analyzing cost overruns to determine their cause is an example of
    A. planning.
    B. control.
    C. decision making.
    D. both a and c.

 

  1. Monitoring the number of defects produced is an example of the management function of
    A. planning.
    B. control.
    C. decision making.
    D. both a and c.

 

  1. Comparing actual quality costs with planned quality costs is an example of
    A. planning.
    B. controlling.
    C. performance evaluation.
    D. both b and c.

 

  1. Performance reports are accounting reports that compare
    A. planned data with actual data.
    B. audited data with actual data.
    C. managers’ bonuses with performance ratings by supervisors.
    D. planned data with industry standards.

 

  1. Setting the company’s profit targets for the upcoming year is an example of the management function of
    A. planning.
    B. control.
    C. variance analysis.
    D. internal auditing.

 

  1. Developing a company strategy for responding to anticipated new markets is an example of
    A. planning.
    B. control.
    C. performance evaluation.
    D. all of these.

 

  1. The planning process includes
    A. setting objectives.
    B. identifying means of achieving the objectives.
    C. making decisions.
    D. all of these.

 

  1. Investigating production variances and adjusting the production process is an example of
    A. planning.
    B. control.
    C. internal auditing.
    D. both a and c.

 

  1. In a performance report, the
    A. differences between actual costs and allowed costs are always undesirable.
    B. expenditures of less than allowed amounts are undesirable.
    C. expenditures of more than allowed amounts are not permitted to occur.
    D. expenditures of less than allowed amounts are desirable.

 

  1. Evaluating the performance of a segment of the company is an example of
    A. planning.
    B. control.
    C. internal auditing.
    D. both a and c.

 

  1. The formulation of a program for the accomplishment of a specific purpose is referred to as
    A. controlling.
    B. motivating.
    C. organizing.
    D. planning.

 

  1. The manager has to decide what tasks are needed and how they should be accomplished. This statement describes
    A. the organization chart.
    B. planning.
    C. organizing.
    D. none of these.

 

  1. The monitoring of a plan’s implementation is called
    A. planning.
    B. controlling.
    C. decision making.
    D. budgeting.

 

  1. Inspecting units produced to determine if they meet specifications is an example of
    A. planning.
    B. control.
    C. decision making.
    D. both a and c.

 

  1. Continuous improvement is
    A. critical in a dynamic environment.
    B. important to finding and maintaining a competitive advantage.
    C. an effort to find ways to increase overall efficiency, improve quality, and reduce costs.
    D. all of these.

 

  1. Which of the following describes the managerial activity of comparing actual results with budgeted results?
    A. control
    B. continuous improvement
    C. planning
    D. decision making

 

  1. Managers are considering outsourcing sub-components of production. Data is collected about the costs of making the sub-component. Different bids are sought about the purchase of the sub-components. Which managerial activity is applicable in this situation?
    A. control
    B. continuous improvement
    C. planning
    D. decision making

 

  1. In a company, engineers have redesigned production processes lowering production costs, shortening production cycle time, reducing waste and improving quality. Which type of managerial activity applies to this situation?
    A. controlling
    B. continuous improvement
    C. planning
    D. decision making

 

  1. Determining the bid your company should submit on a construction contract is an example of
    A. planning.
    B. control.
    C. decision making.
    D. none of the above

 

  1. Setting the selling price of a company’s product is an example of
    A. planning.
    B. control.
    C. decision making.
    D. all of these.

 

  1. Which of the following have been found to be TRUE?
    A. Firms that emphasize ethics outperform firms that don’t emphasize ethics.
    B. Those corporations that mention ethics in their management reports have lower than average performance.
    C. Companies with a strong code of ethics and sense of integrity and honor will have trouble competing over the long run.
    D. All of these.

 

  1. Principles of personal ethical behavior include
    A. integrity.
    B. respect for others.
    C. fairness.
    D. all of these.

 

  1. The standards of ethical conduct for management accountants include
    A. competence and performance.
    B. integrity and respect for others.
    C. confidentiality, confidence, integrity, and observance.
    D. competence, confidentiality, integrity, and credibility.

 

  1. Extending the close of the fiscal year beyond December 31 so that some sales of next year are included in the current year would be a violation of which standard of ethical conduct for management accountants?
    A. competence
    B. confidentiality
    C. conformance
    D. all of these

 

  1. When a management accountant attends training seminars on new FASB rules, which part of the IMA Code of Conduct is being observed?
    A. competence
    B. confidentiality
    C. integrity
    D. credibility

 

  1. Altering dates of shipping documents of next January’s sales to record them as sales in the current year would be a violation of which standard of ethical conduct for management accountants?
    A. competence
    B. integrity
    C. credibility
    D. all of these

 

  1. The acceptance of a savings bond from a supplier would be a violation of which standard of ethical conduct for management accountants?
    A. confidentiality
    B. integrity
    C. reliability
    D. none of these

 

  1. In resolving an ethical conflict, it is inappropriate to discuss the problem with the immediate supervisor because of a violation of which standard of ethical conduct for management accountants?
    A. competence
    B. confidentiality
    C. credibility
    D. This action is not in violation of the code of conduct.

 

  1. In resolving an ethical conflict, which of the following would NEVER be appropriate?
    A. discussing the matter with the chief executive officer
    B. discussing the matter with an external member of the board of directors
    C. taking the matter to the press where there is no legal requirement
    D. resigning from the position because of a conflict

 

  1. Which of the following relates to the credibility section of the IMA Code of Conduct?
    A. Prepare clear and complete reports.
    B. Communicate professional limitations.
    C. Avoid actual or apparent conflicts of interest.
    D. Communicate information fairly and objectively.

 

  1. Disclosing all information, unfavorable as well as favorable, that could influence an intended user’s understanding of reports, would relate to what section of the IMA Code of Conduct?
    A. competence
    B. independence
    C. integrity
    D. credibility

 

  1. Engaging in or supporting an activity that would discredit the profession would relate to which part of the IMA Code of Conduct?
    A. competence
    B. independence
    C. integrity
    D. credibility

 

  1. When a management accountant ignores data in favor of unsupported opinion, this action would speak most directly  to which part of the IMA Code of Conduct?
    A. competence
    B. confidentiality
    C. independence
    D. credibility

 

  1. Disclosing company information (when not legally obligated to do so) would be a violation of which part of the IMA Code of Conduct?
    A. competence
    B. confidentiality
    C. independence
    D. credibility

 

  1. The Standards of Ethical Professional Practice of the Institute of Management Accountants addresses all of the following EXCEPT
    A. competence
    B. confidentiality
    C. strategic cost management
    D. integrity

 

  1. Persons in the United States who provide external auditing services are designated as
    A. Certified Public Accountants.
    B. Certified Financial Accountants.
    C. Chartered Accountants.
    D. Certified Management Accountants.

 

  1. An accountant certified to possess the minimal professional qualifications for an external auditor is a
    A. CPA
    B. CMA
    C. CIA
    D. all of these.

 

  1. The IMA has a program to recognize professional competence and educational attainment in the field of management accounting. The program leads to designation as a
    A. Certified Management Accountant.
    B. controller.
    C. Chartered Accountant.
    D. treasurer.

 

  1. The certification sponsored by the Institute of Management Accountants that emphasizes economics, finance, management, financial accounting and reporting, management reporting, and decision analysis is the
    A. CPA
    B. CMA
    C. CIA
    D. all of these.

 

  1. Explain the relationship between the Cost Management System and the Financial Accounting System.

 

 

 

 

 

  1. Describe the two major subsystems of the Cost Management System and briefly summarize their importance.

 

 

 

 

 

  1. Briefly discuss the relationship between cost accounting, management accounting, and cost management.

 

 

 

 

 

  1. Identify and discuss the factors that are affecting the way cost accounting is practiced.

 

 

 

 

 

  1. What is customer orientation? Why is it important in a global environment? What role does cost management play in serving customers?

 

 

 

 

 

  1. Discuss the advances of information technology and how these advances might affect the university education supply chain?

 

 

 

 

 

  1. Discuss four factors that are changing the way we manufacture.

 

 

 

 

 

  1. Why has time become such an important factor in competition?

 

 

 

 

 

  1. How has the nature of accounting systems shifted in response to technology?

 

 

 

 

 

  1. What is the difference between a staff position and a line position?

 

 

 

 

 

  1. Contrast the role of the financial vice president, the controller, and the treasurer.

 

 

 

 

 

  1. Describe the connection between planning, controlling, and feedback.

 

 

 

 

 

  1. Give some examples of reporting feedback that will assist in continuous improvement of a service industry company.

 

 

 

 

 

  1. What is the role of the controller in an organization? Describe some of the activities over which he or she has control.

 

 

 

 

 

  1. You are a management accountant for the Eastern Division of Strong Enterprises. Your longtime friend, Alana Rodriguez, is the Eastern Division manager. Alana was instrumental in helping you obtain your current position. Because the manager’s annual bonus is based on the amount of profit the Eastern Division reports for the year, Alana has asked you to “massage the numbers” to make the Eastern Division appear more profitable.Considering the Standards of Ethical Conduct for Management Accountants, how would you respond to Alana Rodriguez’ request?

 

 

 

 

 

  1. Discuss how the goal of profit maximization is affected by ethical considerations. What incentives are there for managers to manipulate accounting data in unethical ways in order to increase profits?

 

 

 

 

 

  1. What can a company do to increase the likelihood of its employees being ethical in all their undertakings?

 

 

 

 

 

  1. You are a management accountant for Savage Corporation. Gabe Hopen, the sales representative for one of Savage suppliers, invited you to attend a professional sporting event. Because you are an avid sports fan, you accepted Gabe’s invitation.At the sporting event, Gabe begins talking about Savage’s upcoming contract renewals with suppliers. Because there is intense competition and because it is the first bid he will submit to Savage Corporation, he asks you to review his bid to make sure “it is good enough” before he submits it to the company. In addition, because you are knowledgeable about costs, especially regarding this contract, he asks you to tell him if his bid is “in the ballpark” or “needs improvement.” he indicates that if he wins the contract, you will be provided with season tickets for the rest of the year.Considering the Standards of Ethical Conduct for Management Accountants, how would you respond to Gabe’s request?

 

 

 

 

 

  1. Explain what is meant by confidentiality and why it is important.

 

 

 

 

 

  1. Discuss the three forms of accounting certification. Which form of certification do you believe is best for management accountants? Why?

 

 

Chapter 3–Cost Behavior

Student: ___________________________________________________________________________

  1. Costs can display variable, fixed, or mixed behavior, and it important that they are classified accurately.
    True    False

 

  1. A cost that does not change as output changes is a variable cost, and one that changes is a fixed cost.
    True    False

 

  1. A cost object is the item for which managers want cost information, so the first step is to determine appropriate cost objects.
    True    False

 

  1. Fixed costs are costs that, in total, are constant within the relevant range as the level of the associated driver varies.
    True    False

 

  1. Variable costs are defined as costs that, in total, are constant regardless of change in an activity driver.
    True    False

 

  1. Mixed costs are costs that have both a fixed and a variable component.
    True    False

 

  1. Resources, such as direct materials, direct labor, electricity, equipment, and so on, are economic elements that enable one to perform activities.
    True    False

 

  1. The level of activity performance where the amount of activity capacity needed corresponds to the level of efficiency required is called the activity capacity.
    True    False

 

  1. Resources are categorized as flexible, which are supplied as needed, and committed, which are supplied in advance of usage.
    True    False

 

  1. Activity-based use of resources can improve both managerial control and decision making because it encourages managers to pay more attention to controlling resource usage and spending.
    True    False

 

  1. Methods of estimating costs used by companies include the industrial engineering method, the account analysis method, and the instant decision method.
    True    False

 

  1. The industrial engineering method is used to determine which activities, and in what amounts, are necessary to complete a process.
    True    False

 

  1. The account analysis method can be used to estimate costs by classifying accounts in the general ledger as variable.
    True    False

 

  1. The three widely used quantitative methods of separating a mixed cost into its fixed and variable components are the high-low method, the scatter plot method, and the method of least squares.
    True    False

 

  1. The high-low method preselects the two points that are used to compute the parameters F and X in the expression Y = F + VX
    True    False

 

  1. The plot of data points showing the relationship between materials handling costs and activity output is called a scattergraph.
    True    False

 

  1. In the method of least squares, each single measure of closeness is first squared. Squaring the deviations avoids problems caused by a mix of positive and negative numbers.
    True    False

 

  1. A feature of regression routines, not provided by the scatter plot of high-low methods, is to provide information to and in the assessment of reliability of the estimated costs formula.
    True    False

 

  1. The percentage of variability in the dependent variable explained by an independent variable (i.e. measure of activity output) is called the coefficient of correlation.
    True    False

 

  1. An alternative measure of goodness of fit is the coefficient of determination.
    True    False

 

  1. Finding a strong statistical association between an activity cost and an activity driver can provide evidence to managers about the correctness of a driver selection.
    True    False

 

  1. Whenever least squares is used to fit an equation involving two or more independent variables, the method is called multiple regression.
    True    False

 

  1. When Multiple regression is used, the user has a choice of using manual computation or using regression programs.
    True    False

 

  1. Multiple regression is a dependable tool for identifying the behavior of activity costs.
    True    False

 

  1. Multiple regression can be useful to assess cost behavior when dependent variable is affected by only one independent variable.
    True    False

 

  1. A number of cost behavior patterns do not follow a linear pattern, instead, they follow a nonlinear cost curve called the learning curve.
    True    False

 

  1. Managers agree that the ideas behind the learning curve can extend to the service industry only.
    True    False

 

  1. The basis of the learning curve is that as we perform an action over and over, we improve, and each additional performance takes less time than the preceding ones.
    True    False

 

  1. The experience curve relates cost to increased efficiency, such that the more a task is performed, the lower the cost of doing will be.
    True    False

 

  1. The cumulative average-time learning curve model states that the cumulative average time per unit increases by a constant percentage.
    True    False

 

  1. The most widely used method to determine cost behavior is managerial judgement.
    True    False

 

  1. Managerial judgement includes the possibility of mixed costs.
    True    False

 

  1. Before opting to use managerial judgment, management should make sure that each cost is predominantly fixed or variable.
    True    False

 

  1. Based on managerial judgement, the best predictor of manufacturing costs is the units available.
    True    False

 

  1. If a company changes from skilled labor to robots, the previous data are of little value in predicting future costs.
    True    False

 

  1. __________ explain changes in costs as units produced change.
    ________________________________________

 

  1. __________ explain changes in cost factors other than changes in units produced.
    ________________________________________

 

  1. __________ analysis focuses on how costs react to changes in activity levels.
    ________________________________________

 

  1. __________ are assumed to be the sole drivers of a traditional cost management system.
    ________________________________________

 

  1. __________ result when organizations acquire many multiperiod service capacities by paying cash up front.
    ________________________________________

 

  1. __________ are those acquired from outside sources where the terms of acquisition do not require any long-term commitments.
    ________________________________________

 

  1. __________ are costs incurred that provide long-term activity capacity.
    ________________________________________

 

  1. A __________ function displays a constant level of cost for a range of output and then jumps to a higher level.
    ________________________________________

 

  1. Costs that follow a step-cost behavior are defined as __________ costs.
    ________________________________________

 

  1. The __________ analysis method is a method of determining cost behavior.
    ________________________________________

 

  1. The __________ method may be used to determine the activities and amounts for cost behavior.
    ________________________________________

 

  1. __________ and __________ studies may be used in conjunction with the industrial engineering method.
    ________________________________________

 

  1. The three quantitative methods of separating a mixed cost into its fixed and variable components are: the high-low method, the scatter plot method and the method of __________ .
    ________________________________________

 

  1. The method of least squares requires a __________ in order to be utilized.
    ________________________________________

 

  1. The Y in the equation Y = F + VX represents the __________, the dependent variable
    ________________________________________

 

  1. The __________ parameter is the point at which the mixed cost line intercepts the cost (vertical) axis.
    ________________________________________

 

  1. The graph showing the relationship between activity costs and drivers/outputs is called the __________ .
    ________________________________________

 

  1. The hypothesis test of cost parameters indicates whether the parameters are different from __________ .
    ________________________________________

 

  1. A __________ interval provides a range of values for the actual cost with a prespecified degree of confidence.
    ________________________________________

 

  1. A correlation coefficient near +1 means that two variables are moving in the __________ direction.
    ________________________________________

 

  1. A correlation coefficient near 0 means that two variables are __________ .
    ________________________________________

 

  1. A correlation coefficient near -1 means that two variables are moving in the __________  direction
    ________________________________________

 

  1. The __________ method is used whenever least squares is used to fit an equation involving two or more independent variables.
    ________________________________________

 

  1. Multiple regression has __________ or __________ independent variables.
    ________________________________________

 

  1. __________ is useful when the dependent variable is affected by more than one independent variable.
    ________________________________________

 

  1. When a cost behavior pattern does not follow a linear pattern, a non linear cost curve is used called the __________ curve.
    ________________________________________

 

  1. Each time cumulative volume doubles, __________ fall by a constant and predictable percentage.
    ________________________________________

 

  1. Costs in marketing, distribution, and service after the sale __________ as number of units produced and sold __________ .
    ________________________________________

 

  1. Cumulative average-time __________ curve assumes the cumulative average time per unit decreases by a constant percentage each time the cumulative quantity of units produced doubles.
    ________________________________________

 

  1. Knowledge of cost and activity-level relationship is used by experienced __________ .
    ________________________________________

 

  1. Cost behavior analysis focuses on how costs
    A. react to changes in profit.
    B. react to changes in activity level.
    C. change over time.
    D. both a and c.

 

  1. The drivers that explain changes in costs as units produced change are called:
    A. Non-unit-level drivers
    B. Activity based cost drivers
    C. Unit-level drivers
    D. All of these

 

  1. Drivers that explain changes in costs as factors other than changes in units produced are called:
    A. Functional based cost drivers
    B. Non-unit-based cost drivers
    C. Unit-based cost drivers
    D. None of these

 

  1. In a traditional cost management system, cost behavior is assumed to be driven only by
    A. unit based cost drivers.
    B. non-unit level cost drivers.
    C. activity-based cost drivers.
    D. none of these.

 

  1. Which of the following would be an example of a unit-based cost driver?
    A. engineering orders
    B. material moves
    C. inspection hours
    D. direct labor hours

 

  1. A $4,000 per month salary paid to a supervisor is an example of a:
    A. fixed cost.
    B. variable cost.
    C. step cost.
    D. mixed cost.

 

  1. When the volume of activity increases within the relevant range, the fixed cost per unit
    A. decreases at first, then increases.
    B. remains the same.
    C. decreases.
    D. increases.

 

  1. Fixed cost per unit is $7 when 25,000 units are produced and $5 when 35,000 units are produced. What is the total fixed cost when nothing is produced?
    A. $130,000
    B. $200,000
    C. $12
    D. $175,000

 

  1. The range of activity within which a linear cost function is valid is called the
    A. normal range.
    B. relevant range.
    C. activity range.
    D. none of these.

 

  1. Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis, which of the following costs would be represented by a line that is parallel to the horizontal axis?
    A. total direct material costs
    B. a consultant paid $75 per hour with a maximum fee of $1,200
    C. employees who are paid $10 per hour and guaranteed a minimum weekly wage of $200
    D. rent on exhibit space at a convention

 

  1. Given the following graphs, which graph represents fixed costs?
I II III
  1. I
    B. II
    C. III
    D. none of these

 

  1. As the volume of activity increases within the relevant range, the variable cost per unit
    A. decreases.
    B. decreases at first, then increases.
    C. remains the same.
    D. increases.

 

  1. A manufacturing company pays an assembly line worker $12 per hour. What is the proper classification of this labor cost?
    A. variable cost
    B. semivariable cost
    C. fixed cost
    D. mixed cost

 

  1. The direct material cost is $20,000 when 2,000 units are produced. What is the direct material cost for 2,500 units produced?
    A. $15,000
    B. $ 5,000
    C. $20,000
    D. $25,000

 

  1. Sandusky Corporation has the following costs for 1,000 units:
Total Cost Cost per Unit
Direct materials $ 1,500 $ 1.50
Direct labor  7,500  7.50
Depreciation on building 30,000 30.00

What is the total cost of direct materials for 100 units?
A. $  1.50
B. $  3.00
C. $150.00
D. $225.00

 

  1. Which of the following costs is a variable cost?
    A. materials used in production
    B. research and development
    C. supervisors’ salaries
    D. rent

 

  1. Direct materials are an example of a
    A. fixed cost.
    B. variable cost.
    C. step cost.
    D. mixed cost.

 

  1. Which of the following statements is TRUE about fixed and variable costs?
    A. Variable costs are constant in total and fixed costs are constant per unit.
    B. Both costs are constant when considered on a total basis.
    C. Both costs are constant when considered on a per-unit basis.
    D. Fixed costs are constant in total and variable costs are constant per unit.

 

  1. Which of the following statements is TRUE about relevant range?
    A. When costs reach a level above the relevant range, they are considered appropriate for analysis.
    B. Linear estimates of an economist’s curvilinear cost function is only valid within the relevant range.
    C. When costs reach a level below the relevant range, they are considered appropriate for analysis.
    D. The nonlinear relevant range is ignored, and only those costs outside of this range may be considered.

 

  1. Which of the following is NOT a correct statement concerning cost behavior?
    A. According to economics, in the long run, all costs are variable.
    B. Variable costs increase in total in relation to the activity driver.
    C. Unit fixed costs increase or decrease inversely in relation to the activity driver.
    D. None of the above

 

  1. The following is an example of a mixed cost:
    A. direct materials
    B. materials used in production
    C. salary plus commission on sales
    D. supervisors’ salaries

 

  1. The linearity assumption is most likely to be a close approximation for an underlying nonlinear cost function
    A. within a relevant range of activity.
    B. over the long run.
    C. for short-run periods.
    D. both a and c.

 

  1. Mixed costs, by definition, contain both
    A. product and period costs.
    B. fixed and variable costs.
    C. direct and indirect costs.
    D. controllable and noncontrollable costs.

 

  1. Assuming costs are represented on the vertical axis and volume of activity on the horizontal axis, which of the following costs would be represented by a line that starts at the origin and reaches a maximum value beyond which the line is parallel to the horizontal axis?
    A. total direct material costs
    B. a consultant paid $100 per hour with a maximum fee of $2,000
    C. employees who are paid $15 per hour and guaranteed a minimum weekly wage of $300
    D. rent on exhibit space at a convention.

 

  1. Longhorn Enterprises rents a truck for a flat fee plus an additional charge per mile. What type of cost is the rent?
    A. step cost
    B. fixed cost
    C. variable cost
    D. mixed cost

 

  1. If production volume increases from 16,000 to 20,000 units,
    A. total costs will increase by 20 percent.
    B. total costs will increase by 25 percent.
    C. total variable costs will increase by 25 percent.
    D. mixed and variable costs will increase by 25 percent.

 

  1. Marlowe Company currently leases a delivery truck from Burton Enterprises for a fee of $250 per month plus $0.40 per mile. Management is evaluating the desirability of switching to a modern, fuel-efficient truck, which can be leased from Goliath, Inc., for a fee of $600 per month plus $0.05 per mile. All operating costs and fuel are included in the rental fees. In general, a lease from
    A. Goliath, Inc., is economically preferable to a lease from Burton Enterprises regardless of the monthly use.
    B. Burton Enterprises is economically preferable below 1,000 miles per month.
    C. Burton Enterprises is economically preferable to a lease from Goliath, Inc., regardless of the monthly use.
    D. Burton Enterprises is economically preferable above 1,000 miles per month.

 

  1. An equipment lease that specifies a payment of $8,000 per month plus $7 per machine hour used is an example of a
    A. fixed cost.
    B. variable cost.
    C. step cost.
    D. mixed cost.

 

  1. Figure 3-1Sonor Systems undertakes its own machine maintenance. The depreciation on the equipment is $20,000 per year and operating cost is $2 per machine hour. Last year 275,000 machine hours were used to produce 100,000 units.See Figure 3-1. Develop a cost equation for the total machine maintenance cost.
    A. Y= $275,000
    B. Y = $20,000
    C. Y = $20,000 + $2 MHR
    D. Y = $2 MHR

 

  1. Figure 3-1Sonor Systems undertakes its own machine maintenance. The depreciation on the equipment is $20,000 per year and operating cost is $2 per machine hour. Last year 275,000 machine hours were used to produce 100,000 units.Refer to Figure 3-1. Compute the total variable machine maintenance cost last year.
    A. $275,000
    B. $240,000
    C. $220,000
    D. $550,000

 

  1. Figure 3-1Sonor Systems undertakes its own machine maintenance. The depreciation on the equipment is $20,000 per year and operating cost is $2 per machine hour. Last year 275,000 machine hours were used to produce 100,000 units.See Figure 3-1. Compute the total machine maintenance cost for last year.
    A. $570,000
    B. $550,000
    C. $420,000
    D. $20,000

 

  1. Figure 3-1Sonor Systems undertakes its own machine maintenance. The depreciation on the equipment is $20,000 per year and operating cost is $2 per machine hour. Last year 275,000 machine hours were used to produce 100,000 units.See Figure 3-1. What is the total maintenance cost per unit produced?
    A. $0.55
    B. $4.20
    C. $5.50
    D. $5.70

 

  1. Figure 3-1Sonor Systems undertakes its own machine maintenance. The depreciation on the equipment is $20,000 per year and operating cost is $2 per machine hour. Last year 275,000 machine hours were used to produce 100,000 units.See Figure 3-1. If 300,000 machine hours had been worked last year, what would be the total machine maintenance cost?
    A. $600,000
    B. $620,000
    C. $420,000
    D. $220,000

 

  1. The efficient level of activity performance is called
    A. practical capacity.
    B. activity capacity.
    C. unused capacity.
    D. acquired capacity.

 

  1. If all the activity capacity acquired is not used, this is an example of
    A. practical capacity.
    B. activity capacity.
    C. unused capacity.
    D. ideal capacity.

 

  1. Flexible resources
    A. are supplied as needed.
    B. are acquired from outside sources, not requiring a long-term commitment.
    C. have no unused capacity.
    D. all of the above.

 

  1. Committed resources
    A. are supplied as needed.
    B. are acquired by a contract for the exact amount of their usage.
    C. may exceed the demand for their usage.
    D. all of the above.

 

  1. Which of the following is an example of a committed fixed expense?
    A. depreciation on a factory building
    B. supervisor’s salary
    C. direct labor
    D. insurance on a building

 

  1. The expenses that result when organizations acquire many multiperiod service capacities by paying cash up front or by entering into an explicit contract that requires periodic cash payments are called:
    A. Managed fixed expenses
    B. Committed fixed expenses
    C. Discretionary fixed expenses
    D. Period expenses

 

  1. The type of resources that are acquired from outside sources, where the terms of acquisition do NOT require any long-term commitment for any given amount of the resource are called:
    A. Flexible resources
    B. Committed resources
    C. Discretionary fixed expenses
    D. Committed fixed expenses

 

  1. The costs incurred that provide long-term activity capacity, usually as the result of strategic planning are called:
    A. Discretionary fixed expenses
    B. Committed fixed expenses
    C. Mixed costs
    D. Step-variable costs

 

  1. Which of the following is an example of a discretionary fixed expense?
    A. contract workers
    B. property taxes on a factory building
    C. depreciation on a factory building
    D. insurance on a building

 

  1. The costs incurred for the acquisition of short-run activity capacity, usually as the result of yearly planning are called:
    A. Discretionary fixed expenses
    B. Committed fixed expenses
    C. Mixed costs
    D. Step-variable costs

 

  1. When a firm acquires the resources needed to perform an activity, it is obtaining
    A. practical capacity.
    B. resource usage.
    C. activity capacity.
    D. unused capacity.

 

  1. The activity-based resource usage model allows managers to better calculate the changes in resource supply and demand resulting from decisions such as:
    A. to make or buy production components
    B. maximization of individual unit performance.
    C. increasing the allocation of costs.
    D. focusing on managing costs rather than activities.

 

  1. A nursing home requires one nurse for each six patients. This is an example of a
    A. fixed cost.
    B. variable cost.
    C. step cost.
    D. mixed cost.

 

  1. Which of the following is an example of a step-fixed cost?
    A. cost of disposable gowns used by patients in a hospital
    B. cost of soaking solution to clean jewelry (Each jar can soak 50 rings before losing effectiveness.)
    C. cost of tuition at $300 per credit hour up to 15 credit hours (Hours taken in excess of 15 hours are free.)
    D. cost of disposable surgical scissors, which are purchased in increments of 100

 

  1. Salaries paid to shift supervisors are an example of a
    A. step-variable cost.
    B. mixed cost.
    C. step-fixed cost.
    D. variable cost.

 

  1. Figure 3-2
    A company usually processes 20,000 orders at a total cost of $300,000. During the year, only 16,000 orders were processed.Refer to Figure 3-2. What is the cost of unused activity?
    A. $300,000
    B. $240,000
    C. $30
    D. $60,000

 

  1. Figure 3-2
    A company usually processes 20,000 orders at a total cost of $300,000. During the year, only 16,000 orders were processed.Refer to Figure 3-2. What is the cost of resource usage?
    A. $300,000
    B. $240,000
    C. $30
    D. $60,000

 

  1. Figure 3-3The Sandoval Company has four process engineers that are each able to process 1,500 design changes. Last year 5,250 design changes were produced by the four engineers. Each engineer is paid $60,000 per year.Refer to Figure 3-3. Calculate the activity rate per change order.
    A. $4 per change order
    B. $10 per change order
    C. $40 per change order
    D. $15 per change order

 

  1. Figure 3-3The Sandoval Company has four process engineers that are each able to process 1,500 design changes. Last year 5,250 design changes were produced by the four engineers. Each engineer is paid $60,000 per year.Refer to Figure 3-3. Calculate the unused capacity.
    A. 750 change orders
    B. 1,375 change orders
    C. 4,000 change orders
    D. 2,000 change orders

 

  1. Figure 3-3The Sandoval Company has four process engineers that are each able to process 1,500 design changes. Last year 5,250 design changes were produced by the four engineers. Each engineer is paid $60,000 per year.Refer to Figure 3-3. What is the unused capacity in dollars?
    A. $60,000
    B. $30,000
    C. $240,000
    D. $15,000

 

  1. Which of the following is NOT a method of determining cost behavior?
    A. industrial engineering method
    B. account analysis method
    C. statistical and quantitative methods
    D. confidence interval model

 

  1. The method for analyzing cost behavior that generally classifies general ledger accounts is
    A. account analysis method.
    B. multiple regression method.
    C. industrial engineering method.
    D. learning curve method.

 

  1. The cost behavior method that may use time and motion studies to determine the activities and amounts for cost behavior analysis is
    A. account analysis method.
    B. industrial engineering method.
    C. regression analysis.
    D. high-low method.

 

  1. Which of the following decision-making tools would NOT be useful in determining the slope and intercept of a mixed cost?
    A. scattergraphs
    B. least-squares method
    C. high-low method
    D. account analysis method

 

  1. If at a given volume total costs and fixed costs are known, the variable costs per unit may be computed as follows:
    A. (Total costs – Fixed costs)/Unit volume
    B. (Total costs/Unit volume) – Fixed costs
    C. (Total costs ´ Unit volume) – (Fixed costs/Unit volume)
    D. Total costs – (Fixed costs/Unit volume)

 

  1. In the formula Y = F + VX, VX refers to the
    A. total variable costs.
    B. intercept.
    C. dependent variable.
    D. independent variable.

 

  1. In the formula Y = F + VX, V refers to the
    A. dependent variable.
    B. intercept.
    C. slope.
    D. total variable costs.

 

  1. In the formula Y = F + VX, F refers to the
    A. slope.
    B. intercept.
    C. dependent variable.
    D. independent variable.

 

  1. In the formula Y = F + VX, Y refers to the
    A. slope.
    B. intercept.
    C. dependent variable.
    D. independent variable.

 

  1. In the formula Y = F + VX, X refers to the
    A. slope.
    B. intercept.
    C. dependent variable.
    D. independent variable.

 

  1. Total costs may be computed as follows:
    A. Fixed costs + (Variable costs per unit ´ Unit volume)
    B. (Fixed costs per unit ´ Unit volume) + Variable costs
    C. Fixed costs per unit + (Variable costs per unit ´ Unit volume)
    D. (Fixed costs per unit ´ Unit volume) + Variable costs per unit

 

  1. Amigos Industries analyzed the relationship between total factory overhead and changes in direct labor hours. It found the following:Y = $6,000 + $6XThe Y in the equation is an estimate of
    A. total variable costs.
    B. total direct labor hours.
    C. total factory overhead.
    D. total fixed costs.

 

  1. Assume the following information:
Volume Total Cost
  90 units $1,200
  98 units $1,300
106 units $1,400

What is the variable cost per unit?
A. $15.00
B. $12.50
C. $13.75
D. $14.78

 

  1. The following cost functions were developed for manufacturing overhead costs:
Manufacturing Overhead Cost Cost Function
Electricity $200 + $20 per direct labor hour
Maintenance $400 + $30 per direct labor hour
Supervisors’ salaries $20,000 per month
Indirect materials $16 per direct labor hour

If January production is expected to be 2,000 units requiring 3,000 direct labor hours, estimated manufacturing overhead costs would be
A. $20,733.
B. $198,000.
C. $152,600.
D. $218,600.

 

  1. Advantages of the method of least squares over the high-low method include all of the following EXCEPT
    A. a statistical method is used to mathematically derive the cost function.
    B. only two points are used to develop the cost function.
    C. the squared differences between actual observations and the line (cost function) are minimized.
    D. all the observations have an effect on the cost function.

 

  1. Weaknesses of the high-low method include all of the following EXCEPT
    A. only two observations are used to develop the cost function.
    B. the high and low activity levels may not be representative.
    C. the method does not detect if the cost behavior is nonlinear.
    D. the method is relatively complex and difficult to apply.

 

  1. The high-low method may give unsatisfactory results if
    A. the points are unrepresentative.
    B. volume of activity is heavy.
    C. volume of activity is light.
    D. the data points all fall on a line.

 

  1. Figure 3-4The following information is available for electricity costs for the last six months of the year:
Month Production Volume Electricity Costs
January 1,400 $2,200
February 2,800 5,400
March 3,200 5,700
April 1,750 3,900
May 1,200 2,400
June 2,100 4,050

Refer to Figure 3-4. Using the high-low method, estimated variable cost per unit of production is
A. $1.75
B. $1.65
C. $1.53
D. $1.26

 

  1. Figure 3-4The following information is available for electricity costs for the last six months of the year:
Month Production Volume Electricity Costs
January 1,400 $2,200
February 2,800 5,400
March 3,200 5,700
April 1,750 3,900
May 1,200 2,400
June 2,100 4,050

Refer to Figure 3-4. What are the fixed costs?
A. $420
B. $100
C. $200
D. none of these

 

  1. The following information was available about supplies cost for the second quarter of the year:
Month Production Volume Supplies Cost
July   700 $3,185
August 1,600 7,100
September   600 2,700

Using the high-low method, the estimate of supplies cost at 1,000 units of production is
A. $2,700.
B. $4,460.
C. $4,900.
D. $7,100.

 

  1. Stanfil Corporation  developed a cost function for manufacturing overhead costs of
    Y = $8,000 + $1.60X. Estimated manufacturing overhead costs at 10,000 units of production are
    A. $16,000.
    B. $17,600.
    C. $24,000.
    D. $26,000.

 

  1. Barron Enterprises has the following information about its truck fleet miles and operating costs:
Year Miles Operating Costs
2014 400,000 $256,000
2015 480,000 280,000
2016 560,000 320,000

What is the best estimate of total costs using the high-low method if the expected fleet mileage for 2017 is 500,000 miles?
A. $288,000
B. $296,000
C. $256,000
D. $320,000

 

  1. The Ladder Company wants to develop a cost estimating equation for its monthly cost of electricity. It has the following data:
Month Cost of Electricity Direct Labor Hours
February $ 8,100   750
May  9,000   850
August 10,200 1,000
November  8,700   800

Using the high-low method, which of the following is the best equation?
A. Y = $900 + $12.00X
B. Y = $900 + $8.40X
C. Y = $1,800 + $8.40X
D. Y = $2,400 + $8.40X

 

  1. Figure 3-5

    Longberry Corporation manufactures and sells party items. The following representative direct labor hours and production costs are provided for a four-month period:
Month Direct Labor Hours Production Costs
May  3,600 $15,000
June  4,800  17,500
July  6,000  20,000
August  4,800  17,500
Total 19,200 $70,000

 

Let a = Fixed production costs per month
b = Variable production costs per direct labor hour
n = Number of months
X = Direct labor hours per month
Y = Total monthly production costs
S = Summation

Refer to Figure 3-5. The monthly production cost can be expressed as
A. X = aY + b
B. X = a + bY
C. Y = a + bX
D. Y = b + aX

 

  1. Figure 3-5

    Longberry Corporation manufactures and sells party items. The following representative direct labor hours and production costs are provided for a four-month period:
Month Direct Labor Hours Production Costs
May  3,600 $15,000
June  4,800  17,500
July  6,000  20,000
August  4,800  17,500
Total 19,200 $70,000

 

Let a = Fixed production costs per month
b = Variable production costs per direct labor hour
n = Number of months
X = Direct labor hours per month
Y = Total monthly production costs
S = Summation

Refer to Figure 3-5. Using the high-low method, what is the cost formula for estimating costs?
A. Total cost = $20,000 + $2.08X
B. Total cost = $7,500 + $2.08X
C. Total cost = $5,000 + 2.08X
D. Total cost = $2.08X

 

  1. Figure 3-5

    Longberry Corporation manufactures and sells party items. The following representative direct labor hours and production costs are provided for a four-month period:
Month Direct Labor Hours Production Costs
May  3,600 $15,000
June  4,800  17,500
July  6,000  20,000
August  4,800  17,500
Total 19,200 $70,000

 

Let a = Fixed production costs per month
b = Variable production costs per direct labor hour
n = Number of months
X = Direct labor hours per month
Y = Total monthly production costs
S = Summation

Refer to Figure 3-5. Predict a cost for 5,000 labor hours.
A. $17,900
B. $17,700
C. $16,667
D. $30,400

 

  1. The cost function derived by the least-squares cost estimation method
    A. is linear.
    B. must be tested for minima and maxima.
    C. is parabolic.
    D. is quadratic.

 

  1. The scatterplot method of cost estimation
    A. is influenced by extreme observations.
    B. requires the use of judgment.
    C. uses the least-squares method.
    D. is superior to other methods in its ability to distinguish between discretionary and committed fixed costs.

 

  1. The following information was taken from a computer printout generated with the least-squares method for use in estimating overhead costs:
Slope 45
Intercept 5,700
Correlation coefficient .72
Activity variable Direct labor hours

The cost formula is
A. Overhead = $5,700 – $45X
B. Overhead = $5,700 + $45X
C. Overhead = $5,700 + ($45 ´ 0.72)
D. Overhead = $5,700 ´ 0.72

 

  1. Which of the following is an advantage of using the scatterplot method over the high-low method to estimate costs?
    A. It is a statistical method to determine the “best fit.”
    B. A cost analyst can review the data visually and eliminate outliers.
    C. The quality of the cost formula relies on the objective judgment of the analyst.
    D. The cost formula can be determined simply by looking at two points of data.

 

  1. Spokane Corporation found its maintenance cost and sales dollars to be somewhat correlated. Last year’s high and low observations were as follows:
Maintenance Cost Sales
$46,000 $600,000
$52,000 $800,000

What is the fixed portion of the maintenance cost?
A. $28,000
B. $52,000
C. $60,000
D. $14,000

 

  1. In the method of least squares, the deviation is the difference between the
    A. predicted and estimated costs.
    B. predicted and average costs.
    C. average and actual costs.
    D. predicted and actual costs.

 

  1. Figure 3-6

    The Stanford Company incurred the following maintenance cost during a five month period:
Month Production Volume Maintenance Costs
June  75 $250
July 115 310
August 190 400
September  60 240
October 135 355

Refer to Figure 3-6. Using a computer or calculator, compute the estimate of variable cost per unit of production using the method of least squares. Rounded to two decimal places, this value would be
A. $3.21.
B. $2.70.
C. $1.31.
D. $1.23.

 

  1. Figure 3-6

    The Stanford Company incurred the following maintenance cost during a five month period:
Month Production Volume Maintenance Costs
June  75 $250
July 115 310
August 190 400
September  60 240
October 135 355

Refer to Figure 3-6. Using a computer or calculator, compute the estimate of the fixed portion of maintenance costs using the method of least squares. Rounded to dollars, this value would be
A. $575.
B. $166.
C. $160.
D. $66.

 

  1. Figure 3-6

    The Stanford Company incurred the following maintenance cost during a five month period:
Month Production Volume Maintenance Costs
June  75 $250
July 115 310
August 190 400
September  60 240
October 135 355

Refer to Figure 3-6. Using a computer or calculator, compute the estimate of maintenance costs at 100 units of production using the method of least squares. This value would be
A. $291.
B. $321.
C. $336.
D. $698.

 

  1. The hypothesis test of cost parameters
    A. is not tested by the t-statistic.
    B. indicates whether the parameters are different from zero.
    C. tells the t-value of the significance achieved.
    D. all of the above.

 

  1. The coefficient of determination is
    A. a measure of the variability of actual costs around the cost-estimating equation.
    B. used to construct probability intervals for cost estimates.
    C. a standardized measure of the degree to which two variables move together.
    D. a measure of the percent variation in the dependent variable that is explained by an independent variable.

 

  1. Figure 3-7

    The following computer printout estimated overhead costs using regression:
t for H(0) Std. error
Parameter Estimate Parameter = 0 Pr > t of parameter
Intercept 100.41 4.81 0.0003 20.88
DLH  14.05 6.78 0.0001  2.07
R Square (R2) 0.80
Standard Error (Se) 25.03
Observations 17

Please find the following statistical table

degrees
of freedom
90% 95% 99% degrees of freedom 90% 95% 99%
1 6.314 12.708 63.657 11 1.796 2.201 3.106
2 2.920 4.303 9.925 12 1.782 2.179 3.055
3 2.353 3.182 5.841 13 1.771 2.160 3.055
4 2.132 2.776 4.604 14 1.761 2.145 3.012
5 2.015 2.571 4.032 15 1.753 2.131 2.947
6 1.943 2.447 3.707 16 1.746 2.120 2.921
7 1.895 2.365 3.499 17 1.740 2.110 2.898
8 1.860 2.306 3.355 18 1.734 2.101 2.878
9 1.833 2.262 3.250 19 1.729 2.093 2.861
10 1.812 2.228 3.169 20 1.725 2.086 2.845

During the last accounting period 10,000 DLH were worked.

Refer to Figure 3-7. What is the model?
A. Overhead = 4.81 + 6.78 DLH
B. Overhead = 100.41 + 14.05 DLH
C. Overhead = 14.05 + 100.41 DLH
D. DLH = 4.81 + 6.78 Overhead

 

  1. Figure 3-7

    The following computer printout estimated overhead costs using regression:
t for H(0) Std. error
Parameter Estimate Parameter = 0 Pr > t of parameter
Intercept 100.41 4.81 0.0003 20.88
DLH  14.05 6.78 0.0001  2.07
R Square (R2) 0.80
Standard Error (Se) 25.03
Observations 17

Please find the following statistical table

degrees
of freedom
90% 95% 99% degrees of freedom 90% 95% 99%
1 6.314 12.708 63.657 11 1.796 2.201 3.106
2 2.920 4.303 9.925 12 1.782 2.179 3.055
3 2.353 3.182 5.841 13 1.771 2.160 3.055
4 2.132 2.776 4.604 14 1.761 2.145 3.012
5 2.015 2.571 4.032 15 1.753 2.131 2.947
6 1.943 2.447 3.707 16 1.746 2.120 2.921
7 1.895 2.365 3.499 17 1.740 2.110 2.898
8 1.860 2.306 3.355 18 1.734 2.101 2.878
9 1.833 2.262 3.250 19 1.729 2.093 2.861
10 1.812 2.228 3.169 20 1.725 2.086 2.845

During the last accounting period 10,000 DLH were worked.

Refer to Figure 3-7. The coefficient of determination in this model tells us that
A. the slope is 14.05.
B. the intercept is 100.41.
C. 80 percent of the variation in the overhead variable is explained by DLH.
D. the slope is significant.

 

  1. Figure 3-7

    The following computer printout estimated overhead costs using regression:
t for H(0) Std. error
Parameter Estimate Parameter = 0 Pr > t of parameter
Intercept 100.41 4.81 0.0003 20.88
DLH  14.05 6.78 0.0001  2.07
R Square (R2) 0.80
Standard Error (Se) 25.03
Observations 17

Please find the following statistical table

degrees
of freedom
90% 95% 99% degrees of freedom 90% 95% 99%
1 6.314 12.708 63.657 11 1.796 2.201 3.106
2 2.920 4.303 9.925 12 1.782 2.179 3.055
3 2.353 3.182 5.841 13 1.771 2.160 3.055
4 2.132 2.776 4.604 14 1.761 2.145 3.012
5 2.015 2.571 4.032 15 1.753 2.131 2.947
6 1.943 2.447 3.707 16 1.746 2.120 2.921
7 1.895 2.365 3.499 17 1.740 2.110 2.898
8 1.860 2.306 3.355 18 1.734 2.101 2.878
9 1.833 2.262 3.250 19 1.729 2.093 2.861
10 1.812 2.228 3.169 20 1.725 2.086 2.845

During the last accounting period 10,000 DLH were worked.

Refer to Figure 3-7. The hypothesis tests of the cost parameters indicate(s) that
A. the slope is significantly different from zero.
B. the intercept is significantly different from zero.
C. both the slope and intercept are not significant.
D. both the slope and intercept are significant.

 

  1. Figure 3-7

    The following computer printout estimated overhead costs using regression:
t for H(0) Std. error
Parameter Estimate Parameter = 0 Pr > t of parameter
Intercept 100.41 4.81 0.0003 20.88
DLH  14.05 6.78 0.0001  2.07
R Square (R2) 0.80
Standard Error (Se) 25.03
Observations 17

Please find the following statistical table

degrees
of freedom
90% 95% 99% degrees of freedom 90% 95% 99%
1 6.314 12.708 63.657 11 1.796 2.201 3.106
2 2.920 4.303 9.925 12 1.782 2.179 3.055
3 2.353 3.182 5.841 13 1.771 2.160 3.055
4 2.132 2.776 4.604 14 1.761 2.145 3.012
5 2.015 2.571 4.032 15 1.753 2.131 2.947
6 1.943 2.447 3.707 16 1.746 2.120 2.921
7 1.895 2.365 3.499 17 1.740 2.110 2.898
8 1.860 2.306 3.355 18 1.734 2.101 2.878
9 1.833 2.262 3.250 19 1.729 2.093 2.861
10 1.812 2.228 3.169 20 1.725 2.086 2.845

During the last accounting period 10,000 DLH were worked.

Refer to Figure 3-7.  Find the t-value for a 90 percent confidence level.
A. 1.740
B. 1.753
C. 6.314
D. 2.920

 

  1. Figure 3-7

    The following computer printout estimated overhead costs using regression:
t for H(0) Std. error
Parameter Estimate Parameter = 0 Pr > t of parameter
Intercept 100.41 4.81 0.0003 20.88
DLH  14.05 6.78 0.0001  2.07
R Square (R2) 0.80
Standard Error (Se) 25.03
Observations 17

Please find the following statistical table

degrees
of freedom
90% 95% 99% degrees of freedom 90% 95% 99%
1 6.314 12.708 63.657 11 1.796 2.201 3.106
2 2.920 4.303 9.925 12 1.782 2.179 3.055
3 2.353 3.182 5.841 13 1.771 2.160 3.055
4 2.132 2.776 4.604 14 1.761 2.145 3.012
5 2.015 2.571 4.032 15 1.753 2.131 2.947
6 1.943 2.447 3.707 16 1.746 2.120 2.921
7 1.895 2.365 3.499 17 1.740 2.110 2.898
8 1.860 2.306 3.355 18 1.734 2.101 2.878
9 1.833 2.262 3.250 19 1.729 2.093 2.861
10 1.812 2.228 3.169 20 1.725 2.086 2.845

During the last accounting period 10,000 DLH were worked.

Refer to Figure 3-7. What is the confidence interval for the predicted overhead cost rounded to the nearest whole number for a 90 percent confidence level?
A. predicted value between 140,557 and 140,644
B. predicted value between 140,644 and 140,731
C. predicted value between  87,000 and 130,500
D. none of these

 

  1. A coefficient of determination of 0.91 means
    A. the two variables move together in the same direction and have a strong relationship.
    B. the parameter is not significant.
    C. the model is significant 91 percent of the time.
    D. that the independent variable explains 91 percent of the cost.

 

  1. What is the difference between a correlation equal to -1 and a correlation equal to 0?
    A. A correlation equal to -1 means two alternatives are moving in the same direction, whereas a correlation of 0 means they are moving in opposite directions.
    B. A correlation equal to -1 means two alternatives are moving in the same direction, whereas a correlation of 0 means they are unrelated.
    C. A correlation equal to -1 means two alternatives are moving in opposite directions, whereas a correlation of 0 means they are moving in the same direction.
    D. A correlation equal to -1 means two alternatives are moving in opposite directions, whereas a correlation of 0 means they are unrelated.

 

  1. A managerial accountant has determined the following relationships between overhead and several possible bases:
Basis Correlation with Total Overhead
Direct labor hours 0.842
Direct labor dollars 0.279
Machine hours -0.837
Employee minutes in coffee breaks -0.243

The best basis for overhead application is
A. direct labor hours.
B. coffee breaks.
C. direct labor dollars.
D. machine hours.

 

  1. What is the difference between a correlation equal to -1 and a correlation equal to +1?
    A. A correlation equal to -1 means two alternatives are moving in the same direction, whereas a correlation of +1 means they are moving in opposite directions.
    B. A correlation equal to -1 means two alternatives are moving in the same direction, whereas a correlation of +1 means they are unrelated.
    C. A correlation equal to -1 means two alternatives are moving in opposite directions, whereas a correlation of +1 means they are moving in the same direction.
    D. A correlation equal to -1 means two alternatives are moving in opposite directions, whereas a correlation of +1 means they are unrelated.

 

  1. What does a correlation coefficient near +1 mean?
    A. Two variables are moving in the opposite direction.
    B. Two variables are moving in the same direction.
    C. Two variables are unrelated.
    D. One variable is not a good predictor of the other.

 

  1. The appropriate range for the coefficient of correlation (r) is
    A. 0 £ r £ 1.
    B. -% £ r £ +%.
    C. -1 £ r £ 1.
    D. -1 £ r £ +%.

 

  1. What does a correlation coefficient near 0 mean?
    A. Two variables are moving in the opposite direction.
    B. Two variables are moving in the same direction.
    C. Two variables are unrelated.
    D. One variable is a good predictor of the other.

 

  1. Which of the following statements is NOT true?
    A. In selecting an independent variable for cost behavior analysis, it is important to determine the activity that causes the cost being analyzed to occur.
    B. Professional judgment is very important in selecting an activity measure for a particular cost.
    C. A low correlation between two variables proves that one causes the other.
    D. The least-squares cost estimation method can be used to measure the linear function.

 

  1. What does a correlation coefficient near -1 mean?
    A. Two variables are moving in the opposite direction.
    B. Two variables are moving in the same direction.
    C. Two variables are unrelated.
    D. One variable is not a good predictor of the other.

 

  1. The confidence interval for the predicted value of Y
    A. is a measure of the likelihood that the prediction interval will not contain the actual cost.
    B. is constructed by multiplying the t-statistic times the standard error.
    C. can only be computed with 95 percent confidence.
    D. all of the above.

 

  1. The following data is available of estimated overhead costs using linear regression:
t for H(0) Std. error
Parameter Estimate Parameter = 0 Pr > t of parameter
Intercept 100.41 4.81 0.0003 20.88
DLH 14.05 6.78 0.0001 2.07
R Square (R 2)  0.80
Standard Error (Se) 25.03
Observations    17

Table of Selected Values: t Distribution

Degrees of Freedom 90% 95% 99%
15 1.753 2.131 2.947
16 1.746 2.120 2.921
17 1.740 2.110 2.898
18 1.734 2.101 2.878
19 1.729 2.093 2.861

What is the interval around Y if 95 percent confidence is desired?
A. Y ± 20.024
B. Y ± 43.87759
C. Y ± 52.8133
D. Y ± 53.33893

 

  1. Figure 3-8The following computer printout estimated overhead costs using multiple regression:
t for H(0) Std. error
Parameter Estimate Parameter = 0 Pr > t of parameter
Intercept 1000 1.96 0.0250 510.204
Setup hours   25 81.96 0.0001   0.305
# of parts  100 9.50 0.0001  10.527
R Square (R2)  0.94
Standard Error (Se) 75.00
Observations   160

During the year the company used 1,000 setup hours and 500 parts.

Refer to Figure 3-8. The degrees of freedom for the model is
A. 158
B. 157
C. 159
D. 160

 

  1. Figure 3-8The following computer printout estimated overhead costs using multiple regression:
t for H(0) Std. error
Parameter Estimate Parameter = 0 Pr > t of parameter
Intercept 1000 1.96 0.0250 510.204
Setup hours   25 81.96 0.0001   0.305
# of parts  100 9.50 0.0001  10.527
R Square (R2)  0.94
Standard Error (Se) 75.00
Observations   160

During the year the company used 1,000 setup hours and 500 parts.

Refer to Figure 3-8. Which slope and intercept parameters are significant at the 0.05 level?
A. intercept
B. setup hours
C. number of parts
D. all of the above

 

  1. Figure 3-8The following computer printout estimated overhead costs using multiple regression:
t for H(0) Std. error
Parameter Estimate Parameter = 0 Pr > t of parameter
Intercept 1000 1.96 0.0250 510.204
Setup hours   25 81.96 0.0001   0.305
# of parts  100 9.50 0.0001  10.527
R Square (R2)  0.94
Standard Error (Se) 75.00
Observations   160

During the year the company used 1,000 setup hours and 500 parts.

Refer to Figure 3-8. The model being measured is
A. Overhead = 1,000 + 25(Setup hours) + 100(# of parts)
B. Overhead = 510 + 0.305(Setup hours) + 10.527(# of parts)
C. Overhead = 0.98 + 40.98(Setup hours) + 4.865(# of parts)
D. Overhead = 1,000 + 25(Setup hours)

 

  1. Figure 3-8The following computer printout estimated overhead costs using multiple regression:
t for H(0) Std. error
Parameter Estimate Parameter = 0 Pr > t of parameter
Intercept 1000 1.96 0.0250 510.204
Setup hours   25 81.96 0.0001   0.305
# of parts  100 9.50 0.0001  10.527
R Square (R2)  0.94
Standard Error (Se) 75.00
Observations   160

During the year the company used 1,000 setup hours and 500 parts.

Refer to Figure 3-8. What is the predicted overhead cost?
A. $2,500
B. $75,000
C. $76,000
D. none of these

 

  1. Which of the following equations uses multiple regression?
    A. Overhead = a + b(MH)
    B. Overhead = a + b(DLH)
    C. DL Costs = a + b(MH)
    D. Overhead = a + b(DLH) + c(MH)

 

  1. Which of the following statements is TRUE about the learning curve?
    A. The curve decreases at an increasing rate.
    B. The learning effect will eventually disappear as the number of units produced increases.
    C. Failure to recognize learning curve effects will cause units produced later in a new production process to receive less cost than they should.
    D. All of these.

 

  1. Wonder Company is planning to introduce a new product with an 80 percent incremental unit-time learning curve for production for batches of 1,000 units. The variable labor costs are $30 per unit for the first 1,000-unit batch. Each batch requires 100 hours. There are $10,000 in fixed costs not subject to learning. What is the cumulative total time (labor hours) to produce 2,000 units?
    A. 180 hours
    B. 160 hours
    C. 100 hours
    D. 80 hours

 

  1. Figure 3-9
    Hereford Company is planning to introduce a new product with an 80 percent learning rate for production for batches of 1,000 units. The variable labor costs are $30 per unit for the first 1,000-unit batch. Each batch requires 100 hours. There are $10,000 in fixed costs not subject to learning.Refer to Figure 3-9. What is the cumulative total time (labor hours) to produce 2,000 units based on the cumulative average-time learning curve?
    A. 20 hours
    B. 80 hours
    C. 100 hours
    D. 160 hoursChapter 5–Product and Service Costing: Job-Order SystemStudent: ___________________________________________________________________________

    1. A production process may yield a tangible product or a service and their unique characteristics determine the best approach for developing a cost management system.
      True    False

     

    1. Manufacturing firms produce intangible products that cannot be inventoried.
      True    False

     

    1. Service firms produce intangible products that are not separable from the customer.
      True    False

     

    1. Heterogeneity means that services cannot be inventoried and must be consumed when performed.
      True    False

     

    1. Inseparability means that production and consumption are inseparable for services.
      True    False

     

    1. The uniqueness of the products or units for cost accounting purposes relates to their common costs.
      True    False

     

    1. Cost accumulation is the determination of the dollar amounts of direct materials, direct labor and overhead costs, and cost measurement is the recognition and recording of costs.
      True    False

     

    1. cost assignment is the assignment of costs to products or services once the costs have been accumulated and measured.
      True    False

     

    1. Unit cost is a critical piece of information for a manufacturing business as well as a service company.
      True    False

     

    1. Activity level is the average activity usage over the long term and normal activity level is the production level for one year.
      True    False

     

    1. Companies operating in job-order industries produce a wide variety of products or jobs that are quite different from each other.
      True    False

     

    1. The job-order cost sheet accumulates the cost of all the jobs produced.
      True    False

     

    1. The collection of all job-order cost sheets defines a work-in-process inventory file.
      True    False

     

    1. The source document known as a time ticket assigns the direct overhead to each particular job.
      True    False

     

    1. A job-order costing process would be  applicable for to airplane manufacturer.
      True    False

     

    1. Cost flow follows costs from the point they are incurred to the point they are recognized as an expense on the income statement.
      True    False

     

    1. When materials are purchased, the costs of the materials “flows” into the materials inventory account.
      True    False

     

    1. In a job-order costing system, direct labor costs assigned to a job are different than the costs assigned to work-in-process inventory.
      True    False

     

    1. In a job-order costing system, actual overhead costs never enter the work-in-process inventory accounts
      True    False

     

    1. The costs of a completed job are transferred from the work-in-process inventory account to the finished goods inventory account.
      True    False

     

    1. A debit balance in overhead control implies that actual overhead costs exceed overhead applied.
      True    False

     

    1. In job-order costing, departmental overhead rates and activity-based costing affect only the application of overhead.
      True    False

     

    1. In an activity-based costing system activity cost is applied to each job by multiplying productivity rate by the job’s use of the associated driver.
      True    False

     

    1. Costs of normal spoilage are included in overhead and applied to all good units produced.
      True    False

     

    1. Abnormal spoilage is charged to the job that caused it.
      True    False

     

    1. In __________ a single product is produced on a continuous basis.
      ________________________________________

     

    1. A __________ service organization does not use raw material or tangible items for the customer.
      ________________________________________

     

    1. __________ means that services cannot be inventoried but must be consumed when performed.
      ________________________________________

     

    1. __________ is the recognition and recording of costs.
      ________________________________________

     

    1. Determining the dollar amounts of direct materials, direct labor, and overhead used in production involves __________ .
      ________________________________________

     

    1. The association of production costs with the units produced is called __________ .
      ________________________________________

     

    1. The __________ activity level is the production level a firm expects to attain for the coming year.
      ________________________________________

     

    1. The __________ costing system assigns costs by the job.
      ________________________________________

     

    1. The __________ form indicates the type and quantity of each material issued to the factory.
      ________________________________________

     

    1. A __________ inventory file is a file of job-order cost sheets.
      ________________________________________

     

    1. The actual __________ costs are not included on a job-order sheet.
      ________________________________________

     

    1. Purchases of direct materials are recorded as a debit to the  __________ account.
      ________________________________________

     

    1. The entry that captures the flow of material from the storeroom to work-in-process is called
      the __________ inventory account.
      ________________________________________

     

    1. __________ are the source of information for posting the labor cost flows.
      ________________________________________

     

    1. The total applied overhead at a given point in time is given by the credit balance in the __________ control account.
      ________________________________________

     

    1. When a job is completed the total costs are transferred to a  __________ inventory file.
      ________________________________________

     

    1. When a job is shipped to a customer, the finished job cost becomes the cost of the __________ sold.
      ________________________________________

     

    1. In job-order costing, departmental overhead rates and activity-based costing affect only the application of __________ .
      ________________________________________

     

    1. The defective units expected due to the nature of the typical production process are called __________ .
      ________________________________________

     

    1. The defective units due to the exacting nature of a particular job is called __________ .
      ________________________________________

     

    1. Which of the following is a manufactured product?
      A. bungee jumping
      B. beauty salon
      C. automobile
      D. restaurant

     

    1. Manufacturers producing unique or customized products would employ a(n)
      A. process costing system.
      B. job-costing system.
      C. homogeneous costing system.
      D. all of the above.

     

    1. Which of the following is a pure service?
      A. bungee jumping
      B. beauty salon
      C. restaurant
      D. software

     

    1. A pure service organization has
      A. no raw materials, no inventories, and a definite separation between the plant and the customer.
      B. raw materials, tangible items, and no separation between the plant and the customer.
      C. no raw materials, no tangible items, and no separation between the plant and the customer.
      D. none of these.

     

    1. Inseparability refers to the
      A. nonphysical nature of services as opposed to products.
      B. fact that production and consumption are inseparable for services.
      C. greater chances for variation in the performance of services than in the production of products.
      D. fact that services cannot be inventoried but must be consumed when performed.

     

    1. Heterogeneity refers to the
      A. nonphysical nature of services as opposed to products.
      B. fact that production and consumption are inseparable for services.
      C. greater chances for variation in the performance of services than in the production of products.
      D. fact that services cannot be inventoried but must be consumed when performed.

     

    1. Intangibility refers to the
      A. nonphysical nature of services as opposed to products.
      B. fact that production and consumption are inseparable for services.
      C. greater chances for variation in the performance of services than in the production of products.
      D. fact that services cannot be inventoried but must be consumed when performed.

     

    1. Perishability refers to the
      A. nonphysical nature of services as opposed to products.
      B. fact that production and consumption are inseparable for services.
      C. greater chances for variation in the performance of services than in the production of products.
      D. fact that services cannot be inventoried but must be consumed when performed.

     

    1. Which of the following firms would make extensive use of service costing?
      A. Law firm
      B. furniture manufacturer
      C. auto dealer
      D. auto manufacturer

     

    1. Which of the following products would NOT use job-order costing?
      A. houses
      B. chemicals
      C. ships
      D. custom-built furniture

     

    1. Which of the following firms would make extensive use of a job-order costing?
      A. dental and medical services
      B. canned foods
      C. discount brokers
      D. petroleum

     

    1. Process costing would be most applicable for
      A. custom machining.
      B. an electronics producer.
      C. high rise building construction.
      D. CPA audits.

     

    1. Which of the following would NOT use a process costing system?
      A. electrical wire
      B. cotton yarn
      C. newsprint
      D. satellites

     

    1. Homogeneous products refer to
      A. products similar in nature.
      B. the nonphysical nature of services and opposed to products.
      C. great variation in the nature products.
      D. products that can be inventoried.

     

    1. Which cost accounting process would be most appropriate for accumulating costs of identical, standardized units?
      A. job-order costing
      B. process costing
      C. normal costing
      D. standard costing

     

    1. The process where a single product is produced on a continuous basis is called:
      A. process production
      B. job-order production
      C. job production
      D. both a and c

     

    1. A source document
      A. is only an external document.
      B. provides transaction data that can be recorded in a database.
      C. is only used to record a transaction between an organization and an outside vendor.
      D. is only an internal document.

     

    1. Which of the following costs is usually NOT easily traceable to finished units of product?
      A. direct labor
      B. direct materials
      C. manufacturing overhead
      D. all of the above

     

    1. Manufacturing overhead consists of all
      A. costs other than direct materials.
      B. manufacturing costs other than direct materials.
      C. costs other than direct materials and direct labor.
      D. manufacturing costs other than direct materials and direct labor.

     

    1. The recognition and recording of costs is called:
      A. Cost assignment
      B. Cost measurement
      C. Cost accumulation
      D. Job order costing

     

    1. Determining the dollar amounts of direct materials, direct labor, and overhead used in production involves:
      A. Job order costing
      B. Cost accumulation
      C. Cost assignment
      D. Cost measurement

     

    1. An actual overhead rate can be calculated
      A. at the beginning of the year.
      B. at the end of each month.
      C. at the beginning of each month.
      D. either at the beginning of the year or at the beginning of the month.

     

    1. Disadvantages of actual costing include
      A. actual cost systems cannot provide accurate unit cost information on a timely basis.
      B. actual cost systems produce unit costs that fluctuate from period to period.
      C. estimates must be used when calculating the actual overhead rate.
      D. both a and b.

     

    1. The effect of uniform production levels on unit production costs can be achieved
      A. by using a factory overhead rate based on long-run normal production activity level.
      B. by using a factory overhead rate based on selling price.
      C. by closing the factory overhead at the end of the accounting period.
      D. by using a factory overhead rate based on different production levels for each year.

     

    1. Normal costing uses which cost in work in process?
      A. applied direct materials
      B. actual overhead
      C. applied overhead
      D. budgeted overhead

     

    1. A normal costing system records which costs in work in process?
      A. actual direct materials, actual direct labor, actual manufacturing overhead
      B. applied direct materials, applied direct labor, applied manufacturing overhead
      C. applied materials and labor and actual manufacturing overhead
      D. actual materials and labor and applied manufacturing overhead

     

    1. The predetermined overhead rate is usually calculated at the
      A. end of each month.
      B. beginning of each month.
      C. beginning of the year.
      D. end of the year.

     

    1. Which of the following costing systems assigns actual costs of materials to inventory?
      A. actual costing system
      B. normal costing system
      C. standard costing system
      D. both a and b

     

    1. The principal difficulty with normal costing is that
      A. the unit cost information is not received on a timely basis.
      B. it can result in fluctuating per-unit overhead costs.
      C. estimated overhead and estimated activity are likely to differ from actual overhead and actual costs, resulting in underapplied or overapplied overhead.
      D. there is no difficulty associated with using normal costing.

     

    1. Unit cost information is needed for
      A. costing inventory.
      B. financial reporting requirements.
      C. decision making.
      D. all of the above.

     

    1. The association of production costs with the units produced is called:
      A. Job-order costing
      B. Cost assignment
      C. Cost measurement
      D. Cost accumulation

     

    1. The production level the firm expects to attain for the coming year is called:
      A. Practical activity level
      B. Normal activity level
      C. Theoretical activity level
      D. Expected activity level

     

    1. Unit costs are critical for
      A. valuing inventory.
      B. determining net income.
      C. decisions to enter a new product line.
      D. all of the above.

     

    1. In developing unit costs, overhead costs should be assigned using activity drivers. Which would be the likely activity driver for a production process using a lathe?
      A. units produced
      B. direct labor hours
      C. machine hours
      D. direct materials cost

     

    1. Unit cost is important information for which of the following?
      A. valuing inventory
      B. determining income
      C. decision making
      D. all of the above

     

    1. The average activity that a firm experiences in the long term (more than one year) is called:
      A. Expected activity level
      B. Normal activity level
      C. Theoretical activity level
      D. Practical activity level

     

    1. The absolute maximum production activity of a manufacturing firm is called:
      A. Expected activity level
      B. Normal activity level
      C. Theoretical activity level
      D. Practical activity level

     

    1. The maximum output that can be realized if everything operates efficiently is referred to as:
      A. Expected activity level
      B. Normal activity level
      C. Theoretical activity level
      D. Practical activity level

     

    1. The system which assign(s) costs by the job is termed:
      A. The process costing system
      B. The job-order costing system
      C. The project costing system
      D. Both a and c

     

    1. A job-order costing process would be most applicable for
      A. a food processing plant.
      B. natural gas processing.
      C. airplane manufacturing.
      D. fertilizer production.

     

    1. The document which indicates the type and quantity of each material issued to the factory is called the:
      A. control account
      B. materials requisition form
      C. production list
      D. work ticket

     

    1. The collection of all job cost sheets defines a
      A. materials file.
      B. finished goods file.
      C. cost of goods file.
      D. work-in-process file.

     

    1. The document that identifies each job and accumulates its manufacturing costs is called:
      A. job-order cost sheet
      B. control account
      C. production order
      D. bill of materials

     

    1. Which of the following items is a basic costing system record in a job-order costing system?
      A. materials requisition form
      B. job-order cost sheet
      C. job time ticket
      D. all of the above

     

    1. The cost of direct materials is assigned to a job by the use of a source document known as a
      A. job cost sheet.
      B. control account.
      C. materials requisition form.
      D. production order.

     

    1. A work-in-process inventory file is
      A. a file of electronic job-order cost sheets.
      B. a file cabinet where work tickets are stored.
      C. a file of electronic materials requisitions.
      D. none of these.

     

    1. Direct labor costs are assigned to individual jobs using a source document known as a
      A. job-order cost sheet.
      B. payroll check.
      C. time sheet.
      D. requisition form.

     

    1. Figure 5 – 1The Nautical Corporation manufactures custom-made wood wall units. The following data pertains to Job X4A:
    Direct materials placed into production $9,000
    Direct labor hours worked 300 hours
    Direct labor rate per hour $15
    Machine hours worked 100 hours

    Factory overhead rate is $22.50 per machine hour. Job X4A consists of 500 units.

    Refer to Figure 5-1. One-half of Job X4A was sold for $10,000. What is the total amount of costs assigned to Job X4A?
    A. $20,250
    B. $15,750
    C. $13,500
    D.  $9,000

     

    1. Figure 5 – 1The Nautical Corporation manufactures custom-made wood wall units. The following data pertains to Job X4A:
    Direct materials placed into production $9,000
    Direct labor hours worked 300 hours
    Direct labor rate per hour $15
    Machine hours worked 100 hours

    Factory overhead rate is $22.50 per machine hour. Job X4A consists of 500 units.

    Refer to Figure 5-1. One-half of Job X4A was sold for $10,000. What is the cost per unit for Job X4A?
    A. $18
    B. $31.50
    C. $27
    D. $40.50

     

    1. Figure 5 – 2The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:
    Direct materials placed into production $4,000
    Direct labor hours worked 50 hours
    Direct labor rate per hour $    15
    Machine hours worked 100 hours

    Factory overhead is applied using a plant-wide rate based on direct labor hours.  Factory overhead was budgeted at $80,000 for the year and the direct labor hours were estimated to be 20,000.  Job XY5 consists of 50 units.

    Refer to Figure 5-2. What is overhead cost assigned to Job XY5?
    A. $200
    B. $400
    C. $750
    D. $1,500

     

    1. Figure 5 – 2The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:
    Direct materials placed into production $4,000
    Direct labor hours worked 50 hours
    Direct labor rate per hour $    15
    Machine hours worked 100 hours

    Factory overhead is applied using a plant-wide rate based on direct labor hours.  Factory overhead was budgeted at $80,000 for the year and the direct labor hours were estimated to be 20,000.  Job XY5 consists of 50 units.

    Refer to Figure 5-2. What is the materials cost per unit for Job XY5?
    A. $267
    B. $80
    C. $40
    D. $4

     

    1. Figure 5 – 2The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:
    Direct materials placed into production $4,000
    Direct labor hours worked 50 hours
    Direct labor rate per hour $    15
    Machine hours worked 100 hours

    Factory overhead is applied using a plant-wide rate based on direct labor hours.  Factory overhead was budgeted at $80,000 for the year and the direct labor hours were estimated to be 20,000.  Job XY5 consists of 50 units.

    Refer to Figure 5-2. What is the labor cost per unit for Job XY5?
    A. $4
    B. $15
    C. $0.80
    D. $40

     

    1. Figure 5 – 2The Cameron Corporation manufactures custom-made purses. The following data pertains to Job XY5:
    Direct materials placed into production $4,000
    Direct labor hours worked 50 hours
    Direct labor rate per hour $    15
    Machine hours worked 100 hours

    Factory overhead is applied using a plant-wide rate based on direct labor hours.  Factory overhead was budgeted at $80,000 for the year and the direct labor hours were estimated to be 20,000.  Job XY5 consists of 50 units.

    Refer to Figure 5-2. What the total cost assigned to Job XY5?
    A. $5,1500
    B. $4,400
    C. $4,200
    D. $4,950

     

    1. Which of the following costs is NOT included on a job-order cost sheet?
      A. direct material costs
      B. applied factory overhead costs
      C. direct labor costs
      D. actual factory overhead costs

     

    1. A debit to Materials Inventory indicates materials were
      A. ordered.
      B. requisitioned.
      C. put into production.
      D. purchased.

     

    1. Figure 5 – 3Robinson Corporation constructs new homes. Assume that Robinson uses a job costing system. During July 2014, the following transactions occurred:Robinson purchased $4,500 of lumber on account.

      Robinson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.

      Depreciation of $1,500 on equipment used to build new houses was recorded.

      A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

      Refer to Figure 5-3. The journal entry to record the requisition of lumber for Robinson would include a
      A. debit to Work-in-Process of $4,500.
      B. debit to Materials Inventory of $3,750.
      C. credit to Finished Goods of $3,750.
      D. debit to Work-in-Process of $3,750.

     

    1. Figure 5 – 3Robinson Corporation constructs new homes. Assume that Robinson uses a job costing system. During July 2014, the following transactions occurred:Robinson purchased $4,500 of lumber on account.

      Robinson used $3,750 of lumber in production and incurred 50 hours of direct labor hours at $15 per hour.

      Depreciation of $1,500 on equipment used to build new houses was recorded.

      A house that was completed last period at a cost of $150,000 was sold for $180,000 in cash.

      Refer to Figure 5-3. The journal entry to record labor for Robinson would include a
      A. debit to Finished Goods of $750.
      B. debit to Wages Payable of $750.
      C. credit to Finished Goods of $750.
      D. debit to Work-in-Process of $750.

     

    1. Figure 5 – 4Lanyard Company uses a job-order costing system to account for product costs. The following information pertains to 2014:
    Materials placed into production $140,000
    Indirect labor 40,000
    Direct labor (10,000 hours) 160,000
    Depreciation of factory building 60,000
    Other factory overhead 100,000
    Increase in work-in-process inventory 30,000

    Factory overhead rate is $18 per direct labor hour.

    Refer to Figure 5-4. What is the total amount credited to Materials Inventory for Lanyard in 2014?
    A. $480,000
    B. $170,000
    C. $140,000
    D. $110,000

     

    1. Figure 5 – 4Lanyard Company uses a job-order costing system to account for product costs. The following information pertains to 2014:
    Materials placed into production $140,000
    Indirect labor 40,000
    Direct labor (10,000 hours) 160,000
    Depreciation of factory building 60,000
    Other factory overhead 100,000
    Increase in work-in-process inventory 30,000

    Factory overhead rate is $18 per direct labor hour.

    Refer to Figure 5-4. What is the total amount debited to Finished Goods Inventory in 2011?
    A. $490,000
    B. $510,000
    C. $450,000
    D. $550,000

     

    1. A journal entry debiting Work-in-Process would normally NOT be accompanied by a credit to
      A. Materials Inventory.
      B. Finished Goods.
      C. Overhead Control.
      D. Wages Payable.

     

    1. If there is a debit balance in overhead control, that implies
      A. applied overhead exceeds actual overhead.
      B. actual overhead costs exceed overhead applied. a
      C. actual overhead has not been closed to cost of goods sold.
      D. none of the above.

     

    1. For a manufacturer, the three inventory accounts on the balance sheet are
      A. Materials, Finished Goods, and Cost of Goods Sold.
      B. Materials, Overhead, and Cost of Goods Sold.
      C. Materials, Direct Labor, and Overhead.
      D. Materials, Work-in-Process, and Finished Goods.

     

    1. In a traditional enterprise, the flow of costs through the system is
      A. materials inventory, work-in-process inventory, finished goods inventory, cost of goods sold.
      B. materials inventory, work-in-process inventory, cost of goods sold, finished goods inventory.
      C. work-in-process inventory, materials inventory, finished goods inventory, cost of goods sold.
      D. work-in-process inventory, materials inventory, finished goods.

     

    1. When normal costing is used, actual overhead costs are
      A. recorded in the work-in-process account.
      B. recorded in the overhead control account.
      C. recorded in the finished goods account.
      D. not recorded.

     

    1. Collossal Company uses a predetermined rate to apply overhead. At the beginning of the year, Collossal estimated its overhead costs at $240,000, direct labor hours at 40,000, and machine hours at 10,000. Actual overhead costs incurred were $249,280, actual direct labor hours were 41,000, and actual machine hours were 11,000.If the predetermined overhead rate is based on machine hours, what is the total amount credited to the factory overhead account for the year for Collossal?
      A. $249,280
      B. $246,000
      C. $240,000
      D. $264,000

     

    1. On March 9, 2014, Job XX4 was completed. The job cost sheet showed a total of $6,000 in direct materials and $8,000 in direct labor at a rate of $20 per direct labor hour. Factory overhead is applied at $30 per direct labor hour. The debit to Finished Goods Inventory to record the completion of Job XX4 is
      A. $17,000.
      B. $11,000.
      C. $6,000.
      D. $26,000.

     

    1. Figure 5-5

      Tonneau Corporation had the following information available for October 2014:
         Work in Process, October 1 $20,000
         Materials placed into production, October 27,500
         Direct labor, October 37,500

    Factory overhead rate is 150 percent of direct labor costs.

    Job cost sheets had the following balances:

         Job Z1 $32,500
         Job Z2 55,000
         Job Z3 35,000
         Job Z4 18,750

    Jobs Z3 and Z4 were not completed at the end of December.

    Refer to Figure 5-5. What is the balance in Work-in-Process for Tonneau at the end of October?
    A. $85,000
    B. $87,500
    C. $56,250
    D. $53,750

     

    1. Figure 5-5

      Tonneau Corporation had the following information available for October 2014:
         Work in Process, October 1 $20,000
         Materials placed into production, October 27,500
         Direct labor, October 37,500

    Factory overhead rate is 150 percent of direct labor costs.

    Job cost sheets had the following balances:

         Job Z1 $32,500
         Job Z2 55,000
         Job Z3 35,000
         Job Z4 18,750

    Jobs Z3 and Z4 were not completed at the end of December.

    Refer to Figure 5-5. What is the cost of goods finished during October for Tonneau Corporation?
    A. $85,000
    B. $87,500
    C. $56,250
    D. $53,750

     

    1. Figure 5 – 6In the Monroe Company, the following Job cards were totaled at the end of the month:
      Job 243      $5,750
      Job 244      $4,980
      Job 245      $3,675
      Job 246      $4,250
      Job 247      $5,100
      Job 248      $3,800Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to finished goods.

      Refer to Figure 5-6. What is the cost of goods sold for the month?

      A. $10,730
      B. $10,850
      C. $12,575
      D. none of these

     

    1. Figure 5 – 6In the Monroe Company, the following Job cards were totaled at the end of the month:
      Job 243      $5,750
      Job 244      $4,980
      Job 245      $3,675
      Job 246      $4,250
      Job 247      $5,100
      Job 248      $3,800Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to finished goods.

      Refer to Figure 5-6. What is the ending work-in-process inventory for the month?

      A. $10,730
      B. $4,250
      C. $12,575
      D. none of these

     

    1. Figure 5 – 6In the Monroe Company, the following Job cards were totaled at the end of the month:
      Job 243      $5,750
      Job 244      $4,980
      Job 245      $3,675
      Job 246      $4,250
      Job 247      $5,100
      Job 248      $3,800Jobs 243 and 244 were in Finished Goods Inventory at the beginning of the month. Jobs 245 and 246 were in Work-in-process at the beginning of the month. Jobs 247 and 248 were started during the month. At the end of the month, Jobs 243 and 247 were sent to customers; jobs 245, 247, and 248 were completed and sent to finished goods.

      Refer to Figure 5-6. What is the cost of goods manufactured for the month?

      A. $10,730
      B. $10,850
      C. $12,575
      D. none of these

     

    1. Canmore Company has the following data pertaining to 2014:
    Beginning materials inventory $ 50,000
    Beginning work-in-process inventory -0-
    Beginning finished goods inventory -0-
    Materials placed into production 125,000
    Materials purchased on account 137,500
    Direct labor incurred (10,000 hours) 62,500
    Cost of goods completed (Job BB8) 25,000

    Factory overhead rate is 125 percent of direct labor costs.

    What is the ending materials inventory balance for Canmore in 2014?
    A. $50,000
    B. $62,500
    C. $12,500
    D. $37,500

     

    1. Samuelson Company has the following selected debit balance accounts at the end of the current year: Work-in-Process, $25,000; Finished Goods, $12,500; Cost of Goods Sold, $37,500; and Factory Overhead, $6,000. The pro-rated amount charged to Cost of Goods Sold for factory overhead will be
      A. $25,000.
      B. $3,000.
      C. $37,500.
      D. $6,000.

     

    1. Under normal costing, which of the following statements is true regarding factory overhead?
      A. The balance in factory overhead at the end of the accounting period is closed.
      B. Different overhead rates are used for different quantities of predicted activity.
      C. The balance in factory overhead at the end of the accounting period is kept open.
      D. The immaterial balance in factory overhead at the end of the accounting period is allocated to the cost of goods sold and inventory accounts.

     

    1. Total manufacturing-related costs incurred for Anhauser Company in August for all jobs is as follows:
    Direct materials $  900
    Insurance-factory building 150
    Direct labor 1,200
    Property taxes-factory building 400
    Other factory overhead costs 1,450
    Factory overhead applied 1,650

    Assuming Anhauser uses a normal costing system and applies overhead based on a predetermined rate, what is the credit to Overhead Control to close the account at the end of the year?
    A. $900
    B. $350
    C. $1,450
    D. $1,650

     

    1. Which of the following transactions in a job-order costing system requires the procedure of merely moving a job-order cost sheet from one file to another?
      A. applying factory overhead to jobs
      B. closing overapplied factory overhead
      C. delivering a completed job to a customer
      D. moving the job from one production department to another

     

    1. Figure 5-7

      The following information is available pertaining to the Production Division of Clarkson Enterprises:
    Assembly Dept. Finishing Dept. Total
    Overhead costs $7,500 $22,500 $30,000
    Direct labor hours 7,500   2,500 10,000
    Machine hours 2,500   7,500 10,000
    Production information pertaining to Job 4X5:
    Assembly Dept. Finishing Dept. Total
    Prime costs $1,250   $-0- $1,250
    Direct labor hours   250    -0-    250
    Machine hours      -0-    -0-       -0-
    Units produced   500    -0-    500
    Chapter 7–Allocating Costs of Support Departments and Joint Products

    Student: ___________________________________________________________________________

    1. Common costs are mutually beneficial costs, used in the output of two or more services or products.
      True    False

     

    1. Allocation increases total costs.
      True    False

     

    1. Producing departments create products and services to make and sell.
      True    False

     

    1. Producing departments provide essential services for support departments.
      True    False

     

    1. Causal factors are variables or activities within a producing department that stimulate the incurrence of support costs.
      True    False

     

    1. A single changing rate uses the fixed costs of the support department.
      True    False

     

    1. The use of a multiple charging rate is needed, one for variable costs, and one for fixed costs.
      True    False

     

    1. Dual rates combine the fixed and variable costs.
      True    False

     

    1. Support department fixed costs are allocated on the basis of original capacity.
      True    False

     

    1. Budgeted rates are allocated based on original capacity.
      True    False

     

    1. The three methods of allocating support center costs to producing departments are the direct, sequential, and reciprocal methods
      True    False

     

    1. The direct method is the most difficult way to allocate costs to the support departments.
      True    False

     

    1. The sequential method allocates costs in ranking order of support departments.
      True    False

     

    1. The reciprocal method of allocation recognizes only some of the support departments’ interactions.
      True    False

     

    1. Allocation is not necessary when using JIT manufacturing.
      True    False

     

    1. The overhead rate may be computed once allocation from support service cost to producing department has been performed.
      True    False

     

    1. Departmental overhead rate is computed by dividing the budgeted base by the total overhead in a producing department.
      True    False

     

    1. Departmental overhead is applied to products passing through the department.
      True    False

     

    1. The choice of allocation method depends on an evaluation of costs and benefits, and circumstances.
      True    False

     

    1. Joint production processes result in the output of two or more products produced simultaneously.
      True    False

     

    1. Joint products are two or more products produced simultaneously by the same process.
      True    False

     

    1. The split-off point is the ending point of a joint product process.
      True    False

     

    1. Costs that are easily traced to individual products are called separable costs.
      True    False

     

    1. Under the physical units method, joint costs are distributed to products on the basis of some physical measure.
      True    False

     

    1. The weight factor addresses the advantages of the physical units method.
      True    False

     

    1. __________ are mutually beneficial costs to joint product costing.
      ________________________________________

     

    1. Activities or variables within a producing department that provoke the incurrence of support costs are called __________ .
      ________________________________________

     

    1. The __________ charging rate combines variable and fixed costs of support departments.
      ________________________________________

     

    1. Support department __________ costs are allocated on the basis of original capacity.
      ________________________________________

     

    1. The __________ method of allocating costs, allocates costs from support to producing departments.
      ________________________________________

     

    1. The __________ method of allocating costs assumes “step down” interdepartmental services.
      ________________________________________

     

    1. After allocation, total overhead in producing department is divided by the budgeted measure of activity to get the __________ overhead rate.
      ________________________________________

     

    1. Departmental __________ is applied to products passing through the department.
      ________________________________________

     

    1. Products produced simultaneously by the same process up to a point are called __________ products.
      ________________________________________

     

    1. A secondary product recovered during the manufacturing of a primary product during a joint process is called a(n): __________ .
      ________________________________________

     

    1. Support department cost to the producing departments is(are) called:
      A. direct materials
      B. direct labor
      C. activity driver
      D. common cost

     

    1. A common cost occurs
      A. when only one product or service is benefited.
      B. when different resources are used to produce one output.
      C. when the same resource is used in the output of two or more outputs.
      D. when a resource is used by two or more companies.

     

    1. Support departments
      A. are responsible for manufacturing the products sold to customers.
      B. work directly on the products of the firm.
      C. provide services directly to customers.
      D. provide essential services to the producing departments.

     

    1. Examples of support departments include all of the following EXCEPT
      A. maintenance.
      B. personnel.
      C. machining.
      D. data processing.

     

    1. Which of the following departments is NOT a support department?
      A. food services
      B. bottling
      C. health services
      D. security

     

    1. The activities or variables within a producing department that provoke the incurrence of support costs are called:
      A. Causal factors
      B. Common costs
      C. Cost objectives
      D. Activity output

     

    1. Examples of producing departments include all of the following EXCEPT
      A. mixing.
      B. molding.
      C. packaging.
      D. accounting.

     

    1. Support department costs are accounted for in which one of the following ways?
      A. They are allocated directly to units of product.
      B. They are allocated to producing departments and then allocated to units of product.
      C. They are allocated to units of product and then allocated to the producing departments.
      D. They are expensed as incurred.

     

    1. Which of the following would be the most appropriate base for allocating the costs of the housekeeping department?
      A. machine hours
      B. direct labor hours
      C. square feet
      D. number of employees

     

    1. Which of the following would be the most appropriate base for allocating the costs of the maintenance department?
      A. machine hours
      B. direct labor hours
      C. number of employees
      D. square feet

     

    1. A possible causal factor to use when allocating cafeteria costs would be
      A. number of square feet.
      B. number of direct labor hours.
      C. number of employees.
      D. appraised value of square footage.

     

    1. The major objective(s) of allocations are
      A. to motivate managers.
      B. to compute product line profitability.
      C. to value inventory.
      D. all of the above.

     

    1. Which of the following is NOT a major objective of allocation as identified by the IMA?
      A. to detect fraud
      B. to obtain a mutually agreeable price
      C. to compute product-line profitability
      D. to value inventory

     

    1. Which of the following cost categories would most likely use machine hours as its activity driver?
      A. personnel
      B. maintenance
      C. purchasing
      D. both a and b

     

    1. Which of the following cost categories would most likely use the number of employees or new hires as its activity driver?
      A. maintenance
      B. purchasing
      C. personnel
      D. accounting

     

    1. Which of the major objectives of allocation as identified by the IMA would NOT be relevant in a service organization?
      A. to obtain a mutually agreeable price
      B. to compute product-line profitability
      C. to predict the economic effects of planning and control
      D. all of the above are objectives of allocation

     

    1. The Ruling Company assigns plant administration costs to the production departments based on the number of employees. Which of the following would NOT be a good combination of common costs with an activity driver?
      A. personnel department costs based on number of employees
      B. purchasing department costs based on machine hours
      C. cafeteria costs based on meals served
      D. warehouse costs based on the value of materials stored

     

    1. If the costs of support departments are NOT allocated to producing departments,
      A. product costs would be understated.
      B. GAAP requirements would not be met.
      C. managers of producing departments may tend to overconsume services.
      D. all of the above.

     

    1. Rules of financial reporting (GAAP) require
      A. that direct manufacturing costs and a fair share of indirect manufacturing costs be assigned to products.
      B. that only producing department costs be assigned to products.
      C. that only direct manufacturing costs be assigned to products.
      D. that only indirect manufacturing costs be assigned to products.

     

    1. What is one of the potential disadvantages of NOT allocating support department costs to production departments?
      A. total costs would not be accumulated
      B. managers may tend to overconsume these services
      C. this would encourage managers to monitor support department performance
      D. managers will use a support service at a more efficient level

     

    1. Which of the following is NOT a benefit of the costs of support departments being allocated to production departments?
      A. The allocation assists producing departments’ use of support departments at a more efficient level.
      B. Allocation of support department costs encourages managers of production departments to monitor performance of the support department.
      C. The allocation helps each department select the correct level of support service consumption.
      D. Management will use the information to support out-sourcing all support services.

     

    1. What is the most likely action to be taken by a company when a support department is NOT as cost effective as an outside source?
      A. The company may force managers to use the internal support department.
      B. The company may force managers to use an external source for the service.
      C. The company may elect not to supply the service internally.
      D. all of the above

     

    1. Figure 7-1Luxurious Department Store incurred $6,000 of indirect advertising costs for its operations. The following data has been collected for 2014 for its three departments:
    Sportswear Lingerie Appliances
    Sales $160,000 $120,000 $120,000
    Direct advertising costs $  7,000 $ 12,000 $  3,000
    Newspaper ad space 62% 20% 18%

    Refer to Figure 7-1.  How much of the indirect advertising costs will be allocated to the Sportswear Department if newspaper ad space is the activity driver?
    A. $6,000
    B. $4,340
    C. $3,720
    D. $2,280

     

    1. Refer to Figure 7-1. How much of the indirect advertising costs will be allocated to the Lingerie Department if direct advertising costs is the activity driver? (Round to the nearest dollar if necessary)
      A. $3,000
      B. $3,273
      C. $6,000
      D. $12,000

     

    1. If a support department’s costs were budgeted to be $150,000 and actual costs incurred by the support department were $200,000, the total amount of the support department’s costs that should be allocated to other departments is
      A. $350,000.
      B. $200,000.
      C. $150,000.
      D. $50,000.

     

    1. Figure 7-2Long Distance Company’s travel department had the following budgeted costs for the coming year:Variable costs     $34 per trip
      Fixed costs        $143,360

      The budgeted usage is given below:
      Yearly Trips       Monthly Peak Trips
      West Sales Territory       110 trips            5
      Midwest Sales Territory  170 trips            12
      Southern Sales Territory  150 trips            15
      Eastern Sales Territory        130 trips            8

      The actual usage is given below:

      West Sales Territory       100 trips
      Midwest Sales Territory  150 trips
      Southern Sales Territory  160 trips
      Eastern Sales Territory        140 trips

      Refer to Figure 7-2.  Using a single charging rate, determine the rate per trip.
      A. $256
      B. $290
      C. $295
      D. $261
      E. $34

     

    1. Figure 7-2Long Distance Company’s travel department had the following budgeted costs for the coming year:Variable costs     $34 per trip
      Fixed costs        $143,360

      The budgeted usage is given below:
      Yearly Trips       Monthly Peak Trips
      West Sales Territory       110 trips            5
      Midwest Sales Territory  170 trips            12
      Southern Sales Territory  150 trips            15
      Eastern Sales Territory        130 trips            8

      The actual usage is given below:

      West Sales Territory       100 trips
      Midwest Sales Territory  150 trips
      Southern Sales Territory  160 trips
      Eastern Sales Territory        140 trips

      Refer to Figure 7-2.  Using a single charging rate, how much will be charged to the West Sales Territory?
      A. $29,000
      B. $31,900
      C. $29,500
      D. $28,160
      E. none of the above

     

    1. Figure 7-2Long Distance Company’s travel department had the following budgeted costs for the coming year:Variable costs     $34 per trip
      Fixed costs        $143,360

      The budgeted usage is given below:
      Yearly Trips       Monthly Peak Trips
      West Sales Territory       110 trips            5
      Midwest Sales Territory  170 trips            12
      Southern Sales Territory  150 trips            15
      Eastern Sales Territory        130 trips            8

      The actual usage is given below:

      West Sales Territory       100 trips
      Midwest Sales Territory  150 trips
      Southern Sales Territory  160 trips
      Eastern Sales Territory        140 trips

      Refer to Figure 7-2.  Using both a fixed and variable rate, what are the respective rates for fixed and variable per trip for the West Sales Territory?  Fixed costs are allocated on the basis of monthly peak trips.
      A. 12.5%; $34
      B. 19.6%; $34
      C. 18.2%; $34
      D. 19%; $34
      E. none of the above

     

    1. Figure 7-2Long Distance Company’s travel department had the following budgeted costs for the coming year:Variable costs     $34 per trip
      Fixed costs        $143,360

      The budgeted usage is given below:
      Yearly Trips       Monthly Peak Trips
      West Sales Territory       110 trips            5
      Midwest Sales Territory  170 trips            12
      Southern Sales Territory  150 trips            15
      Eastern Sales Territory        130 trips            8

      The actual usage is given below:

      West Sales Territory       100 trips
      Midwest Sales Territory  150 trips
      Southern Sales Territory  160 trips
      Eastern Sales Territory        140 trips

      Refer to Figure 7-2.  Using both a fixed and variable rate with  fixed costs allocated on the basis of monthly peak trips, what will the West Sales Territory be charged for the year? (round to the nearest dollar)
      A. $31,498
      B. $21,320
      C. $29,492
      D. $30,638
      E. none of the above

     

    1. If the allocation is for product costing, the allocation of variable support department costs would be calculated as
      A. Actual rate ´ Actual usage.
      B. Actual rate ´ Budgeted usage.
      C. Budgeted rate ´ Actual usage.
      D. Budgeted rate ´ Budgeted usage.

     

    1. Figure 7-3Hanover and Trust, a large law firm, utilizes an internal centralized printing center to serve its three departments: Individuals, Corporate, Trust. The costs of the printing department include fixed costs of $69,190 and variable costs of $0.04 per page. Total estimated print pages are estimated to be 330,000 pages. Individuals are estimated to use 130,000; Corporate will use
      165,000 and 35,000 from the trust area.Refer to Figure 7-3. Assuming a single charging rate is used, what would be the charge per page? (round to the nearest cent)
      A. $.04
      B. $.25
      C. $.21
      D. none of the above amounts

     

    1. Figure 7-3Hanover and Trust, a large law firm, utilizes an internal centralized printing center to serve its three departments: Individuals, Corporate, Trust. The costs of the printing department include fixed costs of $69,190 and variable costs of $0.04 per page. Total estimated print pages are estimated to be 330,000 pages. Individuals are estimated to use 130,000; Corporate will use
      165,000 and 35,000 from the trust area.Refer to Figure 7-3. Assuming a single charging rate is used, if the Corporate Department used 190,000 pages, what would be the printing charges for the Corporate Department? (Round to the nearest cent.)
      A. $47,500
      B. $39,900
      C. $7,600
      D. $42,195

     

    1. Figure 7-3Hanover and Trust, a large law firm, utilizes an internal centralized printing center to serve its three departments: Individuals, Corporate, Trust. The costs of the printing department include fixed costs of $69,190 and variable costs of $0.04 per page. Total estimated print pages are estimated to be 330,000 pages. Individuals are estimated to use 130,000; Corporate will use
      165,000 and 35,000 from the trust area.Refer to Figure 7-3. Assuming a single charging rate is used, if the total pages printed were 340,000, which of the following statements is correct?
      A. The printing costs allocated to all departments would be $85,000.
      B. The printing department would expect to incur costs of $82,790.
      C. Any extra amount charged is due to the fixed costs being charged as if they were variable costs.
      D. all of the above.

     

    1. If the allocation is for performance evaluation, the allocation of variable support department costs would be calculated as
      A. Actual rate ´ Actual usage.
      B. Actual rate ´ Budgeted usage.
      C. Budgeted rate ´ Actual usage.
      D. Budgeted rate ´ Budgeted usage.

     

    1. FIGURE 7-4

      Copies Plus Print operates a copy business at two different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made.During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000.Normal and actual activity (copies made) are as follows:
    Copy Center 1 Copy Center 2
    Normal activity (copies) 600,000 400,000
    Actual activity (copies) 500,000 440,000

    Refer to Figure 7-4. For purposes of performance evaluation, fixed costs allocated to Copy Center 1 are
    A. $36,000.
    B. $37,600.
    C. $30,000.
    D. $32,800.

     

    1. FIGURE 7-4

      Copies Plus Print operates a copy business at two different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made.During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000.Normal and actual activity (copies made) are as follows:
    Copy Center 1 Copy Center 2
    Normal activity (copies) 600,000 400,000
    Actual activity (copies) 500,000 440,000

    Refer to Figure 7-4. For purposes of performance evaluation, fixed costs allocated to Copy Center 2 are
    A. $28,800.
    B. $60,000.
    C. $51,200.
    D. $24,000.

     

    1. FIGURE 7-4

      Copies Plus Print operates a copy business at two different locations. Copies Plus Print has one support department that is responsible for cleaning, service, and maintenance of its copying equipment. The costs of the support department are allocated to each copy center on the basis of total copies made.During the first month, the costs of the support department were expected to be $200,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $128,000 and actual fixed costs of $72,000.Normal and actual activity (copies made) are as follows:
    Copy Center 1 Copy Center 2
    Normal activity (copies) 600,000 400,000
    Actual activity (copies) 500,000 440,000

    Refer to Figure 7-4. Support department costs NOT allocated to the two copy centers are
    A. $22,000.
    B. $9,840.
    C. $8,400.
    D. $6,000.

     

    1. A company incurred $40,000 of common fixed costs and $60,000 of common variable costs. These costs are to be allocated to Departments A and B. Data on capacity provided and capacity used are as follows:
    Capacity Provided Capacity Used
    Department in Hours in Hours
          A 800 640
          B 480 640

    Assume that common fixed costs are to be allocated to Departments A and B on the basis of capacity provided and that common variable costs are to be allocated to Departments A and B on the basis of capacity used. The fixed and variable costs allocated to Department A are

    Fixed Variable
    1. $20,000   $37,500
      B. $20,000   $30,000
      C. $25,000   $30,000
      D. $25,000   $37,500

     

    1. FIGURE  7-5

      Stronghold, Inc., operates a brochure business at two different locations. Stronghold, Inc., has one support department that is responsible for cleaning, service, and maintenance of its printing equipment. The costs of the support department are allocated to each brochure center on the basis of total brochures made.During the first month, the costs of the support department were expected to be $400,000. Of this amount, $120,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $256,000 and actual fixed costs of $144,000.Normal and actual activity (brochures made) are as follows:
    Brochure Center 1 Brochure Center 2
    Normal activity (brochures) 1,200,000 800,000
    Actual activity (brochures) 1,000,000 880,000

    Refer to Figure 7-5.For purposes of performance evaluation, fixed costs allocated to
    Brochure Center 1 are
    A. $60,000.
    B. $72,000.
    C. $65,600.
    D. $75,200.

     

    1. FIGURE  7-5

      Stronghold, Inc., operates a brochure business at two different locations. Stronghold, Inc., has one support department that is responsible for cleaning, service, and maintenance of its printing equipment. The costs of the support department are allocated to each brochure center on the basis of total brochures made.During the first month, the costs of the support department were expected to be $400,000. Of this amount, $120,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $256,000 and actual fixed costs of $144,000.Normal and actual activity (brochures made) are as follows:
    Brochure Center 1 Brochure Center 2
    Normal activity (brochures) 1,200,000 800,000
    Actual activity (brochures) 1,000,000 880,000

    Refer to Figure 7-5. For purposes of performance evaluation, fixed costs allocated to
    Brochure Center 2 are
    A. $57,600.
    B. $120,000.
    C. $48,000.
    D. $102,400.

     

    1. FIGURE  7-5

      Stronghold, Inc., operates a brochure business at two different locations. Stronghold, Inc., has one support department that is responsible for cleaning, service, and maintenance of its printing equipment. The costs of the support department are allocated to each brochure center on the basis of total brochures made.During the first month, the costs of the support department were expected to be $400,000. Of this amount, $120,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $256,000 and actual fixed costs of $144,000.Normal and actual activity (brochures made) are as follows:
    Brochure Center 1 Brochure Center 2
    Normal activity (brochures) 1,200,000 800,000
    Actual activity (brochures) 1,000,000 880,000

    Refer to Figure 7-5. Support department costs NOT allocated to the two brochure centers are
    A. $16,800.
    B. $19,680.
    C. $44,000.
    D. $8,000.

     

    1. A company incurred $80,000 of common fixed costs and $120,000 of common variable costs. These costs are to be allocated to Departments A and B. Data on capacity provided and capacity used are as follows:
    Capacity Provided Capacity Used
    Department in Hours in Hours
          A 400 320
          B 240 320

    Assume that both fixed and variable costs are allocated on the basis of capacity used. The fixed and variable costs allocated to Department A are

    Fixed Variable
    1. $40,000   $60,000
      B. $50,000   $60,000
      C. $40,000   $75,000
      D. $50,000   $75,000

     

    1. A company incurred $120,000 of common fixed costs and $180,000 of common variable costs. These costs are to be allocated to Departments XX and YY. Data on capacity provided and capacity used are as follows:
    Capacity Provided Capacity Used
    Department in Hours in Hours
          XX 500 400
          YY 300 400

    Assume that common fixed costs are to be allocated to Departments XX and YY on the basis of capacity provided and that common variable costs are to be allocated to Departments XX and YY on the basis of capacity used. The fixed and variable costs allocated to Department XX are

    Fixed Variable
    1. $75,000  $112,500
      B. $75,000  $90,000
      C. $60,000  $112,500
      D. $60,000  $90,000

     

    1. A company incurred $120,000 of common fixed costs and $180,000 of common variable costs. These costs are to be allocated to Departments XX and YY. Data on capacity provided and capacity used are as follows:
    Capacity Provided Capacity Used
    Department in Hours in Hours
          XX 500 400
          YY 300 400

    Assume that both fixed and variable costs are allocated on the basis of capacity used. The fixed and variable costs allocated to Department XX are

    Fixed Variable
    1. $75,000  $112,500
      B. $75,000  $90,000
      C. $60,000  $112,500
      D. $60,000  $90,000

     

    1. If a support department’s costs were budgeted to be $75,000 and actual costs incurred by the support department were $70,000, the total amount of the support department’s costs that should be allocated to other departments is
      A. $145,000.
      B. $75,000.
      C. $70,000.
      D. $5,000.

     

    1. Basic guidelines that should be followed when allocating support department costs include
      A. actual costs should always be used for allocations.
      B. budgeted costs, not actual costs, should be allocated.
      C. service department costs should never be allocated at the beginning of the period.
      D. both a and b.

     

    1. Fixed support department costs should be allocated based on
      A. current actual usage of service.
      B. current budgeted usage of service.
      C. practical capacity of user departments.
      D. all of the above.

     

    1. Which of the following methods allocates support department costs?
      A. direct allocation method
      B. reciprocal allocation method
      C. sequential allocation method
      D. all of the above

    Chapter 9–Standard Costing: A Functional-Based Control Approach

    Student: ___________________________________________________________________________

    1. Developing standards for input prices and quantities allows for a more detailed understanding of flexible budget variances.
      True    False

     

    1. Price standards specify amounts and quantity standards specify prices.
      True    False

     

    1. Standard costs are the amount that should be spent to produce a product or service
      True    False

     

    1. Standard costing is used in process industries because it’s more difficult to utilize.
      True    False

     

    1. Both manufacturing and service firms may use standard costing systems.
      True    False

     

    1. The standard cost sheet shows costs needed to make many units of output.
      True    False

     

    1. The unit quantity standards can be used to compute the total amount of inputs allowed for the actual output.
      True    False

     

    1. In computing efficiency variances, managers compute the standard quantity of materials used and the standard hours allowed.
      True    False

     

    1. All variances accounts are closed out at the end of the year.
      True    False

     

    1. The total budget variances are categorized into price variances and usage variances.
      True    False

     

    1. Unfavorable variances occur whenever actual prices or usage are less than standard prices or usage, and the opposite for a favorable variance.
      True    False

     

    1. The direct materials price variance is the difference between actual and standard pricing.
      True    False

     

    1. The direct materials usage variance is the sum of the actual quantities and the standard quantities of units.
      True    False

     

    1. The most detailed method to compute overhead variances is the four-variance method.
      True    False

     

    1. The three-variance method requires dividing costs into fixed and variable amounts.
      True    False

     

    1. The variable overhead efficiency variance measures the change in variable overhead consumption due to efficient or inefficient use of the activity driver used to assign overhead costs to products.
      True    False

     

    1. In standard costing, overhead is applied to a product by debiting work in process and crediting variable and fixed overhead control accounts.
      True    False

     

    1. the direct materials mix variance is the difference in the standard cost of actual inputs and the standard costs of inputs that should have been used.
      True    False

     

    1. A mix variance is created whenever the actual mix of inputs is equal to the standard mix.
      True    False

     

    1. A yield variance occurs when the actual output is the same as the standard output.
      True    False

     

    1. The condition where everything operates perfectly and demands maximum efficiency is called __________ .
      ________________________________________

     

    1. The factors where actual performance differs from planned are called: __________ .
      ________________________________________

     

    1. __________ standards are the standards used for continuous improvement.
      ________________________________________

     

    1. The costing that establishes price and quantity standards for inputs is called __________ costing.
      ________________________________________

     

    1. The document that shows the amount and cost of direct materials, direct labor, and overhead to make a unit of output is called the standard  __________ .
      ________________________________________

     

    1. The variances that focus on the difference between actual quantity and standard quantity are called the __________ variances.
      ________________________________________

     

    1. All variances accounts are __________ at the end of the operating year.
      ________________________________________

     

    1. The sum of the standard plus allowable deviation is called the upper __________ .
      ________________________________________

     

    1. A production __________ would most likely be responsible for an unfavorable variable overhead efficiency variance.
      ________________________________________

     

    1. The __________ variance show the difference between actual output and expected output for a given amount of input.
      ________________________________________

     

    1. The following condition which demands maximum efficiency and can be achieved only if everything operates perfectly is called:
      A. Ideal standards
      B. Currently attainable standards
      C. Budget standards
      D. Personnel standards

     

    1. Variances indicate
      A. the cause of the variance.
      B. who is responsible for the variance.
      C. that actual performance is not going according to plan.
      D. when the variance should be investigated.

     

    1. The unit standard cost is
      A. the product of the standard price times the standard quantity for each unit.
      B. the price standard for each unit.
      C. the actual cost for a standard product.
      D. the amount of actual cost to produce a unit in a standardized process.

     

    1. In setting price standards, the purchasing manager must consider
      A. freight.
      B. quality.
      C. discounts.
      D. all of these.

     

    1. Price standards are the responsibility of
      A. accounting.
      B. purchasing.
      C. personnel.
      D. all of these.

     

    1. All of the following are true of currently attainable standards EXCEPT
      A. Currently attainable standards are based on an efficiently operating work force.
      B. Currently attainable standards are based on ideal conditions.
      C. Currently attainable standards allow for downtime and rest periods.
      D. Currently attainable standards are based on present production processes and technology.

     

    1. Which of the following is NOT true about Kaizen Standards?
      A. Kaizen standards are the standards used for continuous improvement.
      B. Kaizen standards are a currently attainable standard that reflects planned improvement.
      C. Kaizen standards are constantly changing.
      D. Kaizen standards are the standards used in traditional costing systems.

     

    1. Quantity price standards
      A. are standard price multiplied by standard quantity.
      B. specify how much of the quantity of input should be used for the standard price.
      C. specify how much should be paid for the quantity of input to be used.
      D. specify how much of the quantity of input should be used for the actual price.

     

    1. The standard cost sheet includes all of the following EXCEPT
      A. the standard quantity per unit.
      B. the standard material costs per unit.
      C. the standard cost per unit.
      D. the standard labor hours allowed for actual production.

     

    1. The standard cost sheet includes all of the following EXCEPT
      A. the standard cost per unit.
      B. the standard quantity allowed for actual production.
      C. the standard price.
      D. the standard quantity per unit.

     

    1. Standard costing
      A. establishes price and quantity standards for inputs.
      B. provides journal entry support.
      C. is not used in unit costing.
      D. none of these.

     

    1. Rowing Company has developed the following standards for one of its products:
    Direct materials: 7 pounds ´ $8 per pound
    Direct labor: 2 hours ´ $12.50 per hour
    Variable manufacturing overhead: 2.5 hours ´ $7 per hour
    The following activity occurred during the month of March:
    Materials purchased: 5,000 pounds costing $42,500
    Materials used: 3,600 pounds
    Units produced: 500 units
    Direct labor: 1,150 hours at $11.80/hour
    Actual variable manufacturing overhead: $7,500

    The company records materials price variances at the time of purchase.

    The variable standard cost per unit is
    A. $81.00
    B. $91.00
    C. $98.50
    D. $42.50

     

    1. Which of the following equations measures the total budget variance?
      A. AQ ´ (AP – SP)
      B. SP ´ (AQ – SQ)
      C. SQ ´ (AP – SP)
      D. (AQ ´ AP) – (SQ ´ SP)

     

    1. Which of the following equations measures a price variance?
      A. AQ ´ (AP – SP)
      B. SP ´ (AQ – SQ)
      C. SQ ´ (AP – SP)
      D. (AQ – SQ) ´ (AP – SP)

     

    1. The usage variances focus on the difference between
      A. actual quantity used and standard quantity allowed for actual production.
      B. actual costs of inputs and standard costs of inputs.
      C. actual quantity used and standard quantity allowed for budgeted production.
      D. both a and b.

     

    1. During November, 10,000 units were produced. The standard quantity of material allowed per unit was 10 pounds at a standard cost of $3 per pound. If there was an unfavorable usage variance of $18,750 for November, the actual quantity of materials used must be
      A. 23,438 pounds.
      B. 93,750 pounds.
      C. 31,875 pounds.
      D. 106,250 pounds.

     

    1. During September, 12,000 pounds of materials were purchased at a cost of $8 per pound. If there was an unfavorable direct materials price variance of $6,000 for June, the standard cost per pound must be
      A. $8.50.
      B. $8.00.
      C. $7.00.
      D. $7.50.

     

    1. Price/rate variances focus on the differences between
      A. actual and standard inputs multiplied by actual prices.
      B. actual and standard unit prices of an input multiplied by the actual quantity of inputs.
      C. actual and standard inputs multiplied by standard prices.
      D. actual and standard unit prices of an input multiplied by the budgeted quantity of inputs.

     

    1. Firecracker Company has developed the following standards for one of its products.
    Direct materials: 15 pounds ´ $16 per pound
    Direct labor: 4 hours ´ $24 per hour
    Variable manufacturing overhead: 4 hours ´ $14 per hour
    The following activity occurred during the month of October:
    Materials purchased: 10,000 pounds costing $170,000
    Materials used: 7,200 pounds
    Units produced: 500 units
    Direct labor: 2,300 hours at $23.60/hour
    Actual variable manufacturing overhead: $30,000

    The company records materials price variances at the time of purchase.

    The direct materials price variance is
    A. $50,000 favorable.
    B. $50,000 unfavorable.
    C. $10,000 favorable.
    D. $10,000 unfavorable.

     

    1. Figure 9-1Bender Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct labor for the 100 units of Product AA are as follows:
    Materials: Standard Actual
        Standard: 210 pounds at $3.00 per pound $630
        Actual: 240 pounds at $2.85 per pound $684
    Direct labor:
        Standard: 400 hours at $15.00 per hour 6,000
        Actual: 368 hours at $16.50 per hour 6,072

    Refer to Figure 9-1. What is the material usage variance for Bender Corporation?
    A. $90 (F)
    B. $90 (U)
    C. $36 (F)
    D. $36 (U)

     

    1. Figure 9-1Bender Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct labor for the 100 units of Product AA are as follows:
    Materials: Standard Actual
        Standard: 210 pounds at $3.00 per pound $630
        Actual: 240 pounds at $2.85 per pound $684
    Direct labor:
        Standard: 400 hours at $15.00 per hour 6,000
        Actual: 368 hours at $16.50 per hour 6,072

    Refer to Figure 9-1. What is the material price variance for Bender Corporation?
    A. $30 (U)
    B. $90 (F)
    C. $36 (U)
    D. $36 (F)

     

    1. During September, 40,000 units were produced. The standard quantity of material allowed per unit was 5 pounds at a standard cost of $2.50 per pound. If there was a favorable usage variance of $25,000 for September, the actual quantity of materials used must have been
      A. 210,000 pounds.
      B. 190,000 pounds.
      C. 105,000 pounds.
      D. 95,000 pounds.

     

    1. Montana Company uses a standard costing system. The following information pertains to direct labor costs for the month of February:
    Standard direct labor rate per hour $15.00
    Actual direct labor rate per hour $13.50
    Labor rate variance $18,000 favorable
    Actual output 1,000 units
    Standard hours allowed for actual production 10,000 hours

    How many actual labor hours were worked during February for Montana Company?
    A. 10,000
    B. 12,000
    C. 1,200
    D. 2,000

     

    1. Montana Company uses a standard costing system. The following information pertains to direct labor costs for the month of February:
    Standard direct labor rate per hour $15.00
    Actual direct labor rate per hour $13.50
    Labor rate variance $18,000 favorable
    Actual output 1,000 units
    Standard hours allowed for actual production 10,000 hours

    What is the total labor budget variance for Montana Company?
    A. $18,000 (F)
    B. $12,000 (U)
    C. $18,000 (U)
    D. $12,000 (F)

     

    1. Which of the following equations measures the direct labor rate variance?
      A. (SR ´ AH) – (SR ´ SH)
      B. (AR ´ SH) – (SR ´ AH)
      C. (AR ´ AH) – (SR ´ AH)
      D. none of these

     

    1. Malkovich Company uses a standard costing system. The following information pertains to direct materials for the month of July:
    Standard price per lb. $18.00
    Actual purchase price per lb. $16.50
    Quantity purchased 3,100 lbs.
    Quantity used 2,950 lbs.
    Standard quantity allowed for actual output 3,000 lbs.
    Actual output 1,000 units

    Malkovich Company reports its material price variances at the time of purchase.

    What is the standard quantity of direct materials per unit for Malkovich Company?
    A. 3.50 lbs.
    B. 3.00 lbs.
    C. 3.10 lbs.
    D. 3.25 lbs.

     

    1. Malkovich Company uses a standard costing system. The following information pertains to direct materials for the month of July:
    Standard price per lb. $18.00
    Actual purchase price per lb. $16.50
    Quantity purchased 3,100 lbs.
    Quantity used 2,950 lbs.
    Standard quantity allowed for actual output 3,000 lbs.
    Actual output 1,000 units

    Malkovich Company reports its material price variances at the time of purchase.

    What is the material usage variance for Malkovich Company?
    A. $2,850 (F)
    B. $1,950 (F)
    C. $900 (F)
    D. $900 (U)

     

    1. Malkovich Company uses a standard costing system. The following information pertains to direct materials for the month of July:
    Standard price per lb. $18.00
    Actual purchase price per lb. $16.50
    Quantity purchased 3,100 lbs.
    Quantity used 2,950 lbs.
    Standard quantity allowed for actual output 3,000 lbs.
    Actual output 1,000 units

    Malkovich Company reports its material price variances at the time of purchase.

    What is the journal entry to record material purchases?
    A. Materials                             55,800
    Materials Price Variance                          4,650
    Accounts Payable                                   51,150
    B. Accounts Payable                55,800
    Materials                                                55,800
    C. Materials                             55,800
    Accounts Payable                                   55,800
    D. Materials                             51,150
    Materials Price Variance                               4,650
    Accounts Payable                                  55,800

     

    1. If the actual labor rate exceeds the standard labor rate and the actual labor hours exceed the number of hours allowed, the labor rate variance and labor efficiency variance will be
    Labor Rate Variance Labor Efficiency Variance
    1. Favorable                         Favorable
      B. Favorable                         Unfavorable
      C. Unfavorable                     Favorable
      D. Unfavorable                     Unfavorable

     

    1. During January, 7,175 direct labor hours were worked at a standard cost of $20 per hour. If the direct labor rate variance for January was $17,500 favorable, the actual cost per direct labor hour must be
      A. $20.50.
      B. $25.50.
      C. $23.00.
      D. $17.56.

     

    1. During October, 10,000 direct labor hours were worked at a standard cost of $10 per hour. If the direct labor rate variance for October was $4,000 unfavorable, the actual cost per direct labor hour must be
      A. $10.40.
      B. $10.00.
      C. $9.60.
      D. $9.20.

     

    1. Figure 9-2Bodacious Corporation produced 100 units of Product AA. The total standard and actual costs for materials and direct labor for the 100 units of Product AA are as follows:
    Materials: Standard Actual
        Standard: 200 pounds at $3.00 per pound $600
        Actual: 220 pounds at $2.85 per pound $627
    Direct labor:
        Standard: 400 hours at $15.00 per hour 6,000
        Actual: 368 hours at $16.50 per hour 6,072

    Refer to 9-2. What is the labor efficiency variance for Bodacious Corporation?
    A. $480 (U)
    B. $480 (F)
    C. $552 (U)
    D. $552 (F)

     

    1. Refer to Figure 9-2.  What is the journal entry to record labor variances?
      A. Work in Process                  6,072
      Payroll                                                   6,072
      B. Payroll                                 6,072
      Work in Process                                    6,072
      C. Work in Process                  6,000
      Labor Rate Variance             552
      Labor Efficiency Variance                      480
      Payroll                                                  6,072
      D. Work in Process                  6,000
      Labor Efficiency Variance                            552
      Labor Rate Variance                               480
      Payroll                                                  6,072

     

    1. As a general rule, an investigation of a variance should be undertaken only if the
      A. variance is isolated
      B. anticipated benefits are greater than the expected costs.
      C. variance is negative.
      D. variance is positive.

     

    1. The standard plus the allowable deviation is called the:
      A. standard quantity
      B. standard price
      C. upper control limit
      D. total budget variance

     

    1. A materials price variance would NOT be caused by
      A. ordering the wrong quality of materials.
      B. ordering from the wrong supplier.
      C. not taking a quantity discount.
      D. requiring laborers to work overtime.

     

    1. Which of the following factors would cause an unfavorable material quantity variance?
      A. using poorly maintained machinery
      B. using higher quality materials
      C. using more highly skilled workers
      D. receiving discounts for purchasing larger than normal quantities

     

    1. Which of the following factors would cause an unfavorable labor rate variance?
      A. using higher quality materials
      B. using low-efficiency workers
      C. using more unskilled workers
      D. using more highly skilled workers

     

    1. Using more highly skilled direct laborers might affect which of the following variances?
      A. direct materials usage variance
      B. direct labor efficiency variance
      C. variable manufacturing overhead efficiency variance
      D. all of these

     

    1. A five-percent wage increase for all factory employees would affect which of the following variances?
      A. direct materials price variance
      B. direct labor rate variance
      C. direct labor efficiency variance
      D. variable manufacturing overhead efficiency variance

     

    1. Which is NOT an acceptable method of disposing of variances?
      A. closing them to cost of goods sold
      B. closing them to raw materials, work-in-process, and finished goods
      C. closing them to work-in-process, finished goods, and cost of goods sold
      D. all are acceptable methods

     

    1. The standard overhead cost assigned to each unit of product manufactured is called the
      A. total manufacturing cost.
      B. predetermined overhead cost.
      C. applied overhead cost.
      D. estimated overhead cost.

     

    1. An unfavorable variable overhead spending variance may be caused by
      A. the use of excessive quantities of variable overhead items.
      B. the payment of lower prices for variable overhead items used.
      C. the use of excessive quantities of the variable overhead allocation base.
      D. both a and b.

     

    1. Colina Production Company uses a standard costing system. The following information pertains to 2014. Direct labor hours is the driver used to assign overhead costs to products.
    Actual production 5,500 units
    Actual factory overhead costs ($16,500 is fixed) $40,125
    Actual direct labor costs (11,250 hours) $131,625
    Standard direct labor for 5,500 units:
         Standard hours allowed 11,000 hours
         Labor rate $12.00

    The factory overhead rate is based on an activity level of 10,000 direct labor hours. Standard cost data for 5,000 units is as follows:

    Variable factory overhead $22,500
    Fixed factory overhead  13,500
    Total factory overhead $36,000

    What is the variable overhead efficiency variance for Colina Production Company?
    A. $562.50 (F)
    B. $3,000.00 (U)
    C. $1,687.50 (F)
    D. $562.50 (U)

     

    1. Colina Production Company uses a standard costing system. The following information pertains to 2014. Direct labor hours is the driver used to assign overhead costs to products.
    Actual production 5,500 units
    Actual factory overhead costs ($16,500 is fixed) $40,125
    Actual direct labor costs (11,250 hours) $131,625
    Standard direct labor for 5,500 units:
         Standard hours allowed 11,000 hours
         Labor rate $12.00

    The factory overhead rate is based on an activity level of 10,000 direct labor hours. Standard cost data for 5,000 units is as follows:

    Variable factory overhead $22,500
    Fixed factory overhead  13,500
    Total factory overhead $36,000

    What is the fixed overhead volume variance for Colina Production Company?
    A. $3,600 (F)
    B. $1,350 (F)
    C. $4,125 (U)
    D. $1,350 (U)

     

    1. If variable manufacturing overhead is applied based on direct labor hours and there is an unfavorable direct labor efficiency variance
      A. the direct materials usage variance will be unfavorable.
      B. the direct labor rate variance will be favorable.
      C. the variable manufacturing overhead efficiency variance will be unfavorable.
      D. the variable manufacturing overhead spending variance will be unfavorable.

     

    1. Harrangue Company’s standard variable overhead rate is $6 per direct labor hour, and each unit requires 2 standard direct labor hours. During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual variable overhead costs, and 2,900 units of product manufactured.What is the total variable overhead variance for March for Harrangue?
      A. $2,200 (U)
      B. $600 (U)
      C. $1,000 (U)
      D. $1,200 (U)

     

    1. Harrangue Company’s standard variable overhead rate is $6 per direct labor hour, and each unit requires 2 standard direct labor hours. During March, Harry recorded 6,000 actual direct labor hours, $37,000 actual variable overhead costs, and 2,900 units of product manufactured.What is the variable overhead efficiency variance for March for Harrangue?
      A. $2,200 (U)
      B. $2,200 (F)
      C. $1,200 (U)
      D. $600 (U)

     

    1. Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products.
    Direct materials: 10 pounds ´ $3 per pound
    Direct labor: 2.5 hours ´ $8 per hour
    Variable manufacturing overhead: 2.5 hours ´ $2 per hour
    The following activity occurred during the month of June:
    Materials purchased: 125,000 pounds at $2.60 per pound
    Materials used: 110,000 pounds
    Units produced: 10,000 units
    Direct labor: 24,000 hours at $7.50 per hour
    Actual variable manufacturing overhead: $51,000

    The company records materials price variances at the time of purchase.

    The direct labor rate variance is
    A. $12,000 favorable.
    B. $8,000 favorable.
    C. $12,000 unfavorable.
    D. $8,000 unfavorable.

     

    1. Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products.
    Direct materials: 10 pounds ´ $3 per pound
    Direct labor: 2.5 hours ´ $8 per hour
    Variable manufacturing overhead: 2.5 hours ´ $2 per hour
    The following activity occurred during the month of June:
    Materials purchased: 125,000 pounds at $2.60 per pound
    Materials used: 110,000 pounds
    Units produced: 10,000 units
    Direct labor: 24,000 hours at $7.50 per hour
    Actual variable manufacturing overhead: $51,000

    The company records materials price variances at the time of purchase.

    The variable manufacturing overhead efficiency variance is
    A. $1,000 favorable.
    B. $2,000 favorable.
    C. $1,000 unfavorable.
    D. $3,000 unfavorable.

     

    1. Biscuit Company has developed the following standards for one of its products. Direct labor hours is the driver used to assign overhead costs to products.
    Direct materials: 10 pounds ´ $3 per pound
    Direct labor: 2.5 hours ´ $8 per hour
    Variable manufacturing overhead: 2.5 hours ´ $2 per hour
    The following activity occurred during the month of June:
    Materials purchased: 125,000 pounds at $2.60 per pound
    Materials used: 110,000 pounds
    Units produced: 10,000 units
    Direct labor: 24,000 hours at $7.50 per hour
    Actual variable manufacturing overhead: $51,000

    The company records materials price variances at the time of purchase.

    The direct labor efficiency variance is
    A. $8,000 unfavorable.
    B. $8,000 favorable.
    C. $20,000 unfavorable.
    D. $20,000 favorable.

     

    1. Which of the following people is most likely responsible for an unfavorable variable overhead efficiency variance?
      A. production supervisor
      B. accountant
      C. personnel director
      D. supplier

     

    1. A variable overhead efficiency variance could be caused by
      A. using a poor quality material that needs more labor time to meet production standards.
      B. not taking a quantity discount.
      C. paying more than the standard rate for labor.
      D. price increases on the materials.

     

    1. If a company produces fewer units than expected, there will be
      A. a favorable budget variance.
      B. an unfavorable spending variance.
      C. a favorable volume variance.
      D. an unfavorable volume variance.

     

    1. Total fixed overhead budget variance is always equal to
      A. fixed overhead volume variance.
      B. fixed overhead volume variance plus fixed overhead spending variance.
      C. total variable overhead budget variance plus fixed overhead spending variance.
      D. total variable overhead budget variance.

     

    1. Croissant Company’s standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows one direct labor hour per unit. During 2014, Crawford produced 110,000 units of product, (within the relevant range of activity) incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.What is Croissant’s fixed overhead spending variance for 2014?
      A. $60,000 (F)
      B. $24,000 (F)
      C. $30,000 (U)
      D. $36,000 (U)

     

    1. Somalian Corporation uses a standard costing system. Information for the month of May is as follows:
    Actual manufacturing overhead costs ($26,000 is fixed) $80,000
    Direct labor:
         Actual hours worked 12,000 hrs.
         Standard hours allowed for actual production 10,000 hrs.
         Average actual labor cost per hour $18

    The factory overhead rate is based on a normal volume of 12,000 direct labor hours. Standard cost data at 12,000 direct labor hours were as follows:

    Variable factory overhead $48,000
    Fixed factory overhead  24,000
    Total factory overhead $72,000

    What is the variable overhead efficiency variance for Somalian?
    A. $2,000 (U)
    B. $20,000 (U)
    C. $4,000 (U)
    D. $8,000 (U)

     

    1. Somalian Corporation uses a standard costing system. Information for the month of May is as follows:
    Actual manufacturing overhead costs ($26,000 is fixed) $80,000
    Direct labor:
         Actual hours worked 12,000 hrs.
         Standard hours allowed for actual production 10,000 hrs.
         Average actual labor cost per hour $18

    The factory overhead rate is based on a normal volume of 12,000 direct labor hours. Standard cost data at 12,000 direct labor hours were as follows:

    Variable factory overhead $48,000
    Fixed factory overhead  24,000
    Total factory overhead $72,000

    What is the fixed overhead spending variance for Somalian?
    A. $4,000 (U)
    B. $8,000 (U)
    C. $2,000 (U)
    D. $20,000 (U)

     

    1. Croissant Company’s standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows 1 direct labor hour per unit. During 2014, Croissant produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.What is the standard activity level on which Croissant based its fixed overhead rate?
      A. 100,000 direct labor hours
      B. 105,000 direct labor hours
      C. 110,000 direct labor hours
      D. 50,000 direct labor hours

     

    1. Croissant Company’s standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows 1 direct labor hour per unit. During 2014, Croissant produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.What is Croissant’s fixed overhead volume variance for 2014?
      A. $60,000 (U)
      B. $24,000 (F)
      C. $36,000 (U)
      D. $60,000 (F)

     

    1. If actual fixed manufacturing overhead was $55,000 and there was a $1,400 unfavorable spending variance and a $1,000 unfavorable volume variance, budgeted fixed manufacturing overhead must have been
      A. $57,400.
      B. $53,600.
      C. $54,000.
      D. $51,700.

     

    1. Fixed manufacturing overhead was budgeted at $200,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $8,000 favorable and the fixed overhead spending variance was $6,000 unfavorable, fixed manufacturing overhead applied must be
      A. $208,000.
      B. $206,000.
      C. $202,000.
      D. $194,000.

     

    1. Fixed manufacturing overhead was budgeted at $105,000, and 25,000 direct labor hours were budgeted. If the fixed overhead volume variance was $4,000 unfavorable and the fixed overhead spending variance was $1,500 favorable, fixed manufacturing overhead applied must be
      A. $109,000.
      B. $106,500.
      C. $106,500.
      D. $101,000.

     

    1. The formula for the fixed overhead spending variance is:
      A. Standard fixed overhead rate ´ Standard Hours
      B. AFOH – BFOH
      C. Applied fixed overhead – budgeted fixed overhead
      D. (AH – SH) ´ SVOR

     

    1. Figure 9-3Alumni Manufacturing Company has the following information pertaining to a normal monthly activity of 10,000 units:Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit.

      Standard factory overhead rates per direct labor hour are:

    Fixed $ 6.00
    Variable  10.00 $16.00
    Units actually produced in current month 9,000 units
    Actual factory overhead costs incurred
       (includes $70,000 fixed) $156,000
    Actual direct labor hours 9,000 hours

    Refer to Figure 9-3. What is the variable overhead spending variance for Alumni?
    A. $0
    B. $4,000 (F)
    C. $86,000 (U)
    D. $10,000 (F)

     

    1. Figure 9-3Alumni Manufacturing Company has the following information pertaining to a normal monthly activity of 10,000 units:Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit.

      Standard factory overhead rates per direct labor hour are:

    Fixed $ 6.00
    Variable  10.00 $16.00
    Units actually produced in current month 9,000 units
    Actual factory overhead costs incurred
       (includes $70,000 fixed) $156,000
    Actual direct labor hours 9,000 hours

    Refer to Figure 9-3. What is the fixed overhead spending variance for Alumni?
    A. $10,000 (U)
    B. $6,000 (U)
    C. $4,000 (F)
    D. $-0-

     

    1. Figure 9-3Alumni Manufacturing Company has the following information pertaining to a normal monthly activity of 10,000 units:Standard factory overhead rates are based on a normal monthly volume of one standard direct hour per unit.

      Standard factory overhead rates per direct labor hour are:

    Fixed $ 6.00
    Variable  10.00 $16.00
    Units actually produced in current month 9,000 units
    Actual factory overhead costs incurred
       (includes $70,000 fixed) $156,000
    Actual direct labor hours 9,000 hours

    Refer to Figure 9-3.  What is the fixed overhead volume variance for Alumni?
    A. $10,000 (F)
    B. $-0-
    C. $4,000 (F)
    D. $6,000 (U)

     

    1. Formidable Company collected the following information:
    Standard costs per unit:
        Variable overhead 4 machine hours @ $6 per machine hour
        Fixed overhead 4 machine hours @ $10 per machine hour
    Actual output 20,000 units
    Denominator (normal capacity) output 21,000 units
    Actual machine hours 79,000 machine hours
    Actual variable overhead cost $540,000
    Actual fixed overhead cost $810,000

    Using the two variance method, what is the budget variance?
    A. $70,000 (U)
    B. $30,000 (F)
    C. $30,000 (U)
    D. $70,000 (F)

     

    1. Formidable Company collected the following information:
    Standard costs per unit:
        Variable overhead 4 machine hours @ $6 per machine hour
        Fixed overhead 4 machine hours @ $10 per machine hour
    Actual output 20,000 units
    Denominator (normal capacity) output 21,000 units
    Actual machine hours 79,000 machine hours
    Actual variable overhead cost $540,000
    Actual fixed overhead cost $810,000

    Using the two variance method, what is the total variance?
    A. $30,000 (U)
    B. $70,000 (U)
    C. $70,000 (F)
    D. $30,000 (F)

     

    1. Formidable Company collected the following information:
    Standard costs per unit:
        Variable overhead 4 machine hours @ $6 per machine hour
        Fixed overhead 4 machine hours @ $10 per machine hour
    Actual output 20,000 units
    Denominator (normal capacity) output 21,000 units
    Actual machine hours 79,000 machine hours
    Actual variable overhead cost $540,000
    Actual fixed overhead cost $810,000

    Using the two variance method, what is the volume variance?
    A. $6,000 (F)
    B. $40,000 (F)
    C. $40,000 (U)
    D. $6,000 (U)

     

    1. Formidable Company collected the following information:
    Standard costs per unit:
         Variable overhead 4 machine hours @ $6 per machine hour
         Fixed overhead 4 machine hours @ $10 per machine hour

     

    Actual output 20,000 units
    Denominator (normal capacity) output 21,000 units
    Actual machine hours 79,000 machine hours
    Actual variable overhead cost $540,000
    Actual fixed overhead cost $810,000

    Using the three variance method, what is the spending variance?
    A. $36,000 (F)
    B. $30,000 (U)
    C. $36,000 (U)
    D. $30,000 (F)

     

    1. Formidable Company collected the following information:
    Standard costs per unit:
        Variable overhead 4 machine hours @ $6 per machine hour
        Fixed overhead 4 machine hours @ $10 per machine hour
    Actual output 20,000 units
    Denominator (normal capacity) output 21,000 units
    Actual machine hours 79,000 machine hours
    Actual variable overhead cost $540,000
    Actual fixed overhead cost $800,000

    Using the three variance method, what is the budget variance?
    A. $24,000 (U)
    B. $24,000 (F)
    C. $6,000 (U)
    D. $6,000 (F)

     

    1. A mix variance is
      A. created whenever the actual mix of inputs differs from the standard mix.
      B. the difference in the standard cost of the actual mix of inputs used and the standard cost of the mix of inputs that should have been used.
      C. both ‘a’ and ‘b’ are correct.
      D. none of these are correct.

     

    1. Figure 9-4San Francisco Corporation uses two materials in the production of its product. The materials, X and Y, have the following standards:
    Material Standard Mix Standard Unit Price Standard Cost
    X 3,500 units $1.00 per unit $3,500
    Y 1,500 units  3.00 per unit $4,500
    Yield 4,000 units
    Chapter 11–Strategic Cost Management

    Student: ___________________________________________________________________________

    1. Strategic cost management is the identification of strategies to develop a competitive advantage.
      True    False

     

    1. Strategic decision making is important to achieve good inventory control.
      True    False

     

    1. The objective of strategic cost management is to reduce costs while strengthening strategic positions.
      True    False

     

    1. There are two general cost management strategies: cost leadership and focusing.
      True    False

     

    1. Value-chain analysis is identifying and exploiting internal and external linkages to achieve strong strategic positions.
      True    False

     

    1. Exploiting internal linkages involves the assessment of management reliability.
      True    False

     

    1. Exploiting supplier linkages is the exploitation of a firm’s internal activities.
      True    False

     

    1. Exploiting customer linkages is not important since customers do not affect profitability.
      True    False

     

    1. Strategic cost management emphasizes the importance of an external focus and the need to recognize and exploit internal and external linkages.
      True    False

     

    1. Life-cycle cost management involves two types of life-cycle viewpoints: the marketing viewpoint and the production viewpoint.
      True    False

     

    1. Target costing provides a method for reducing costs by exploiting customer and supplier linkages.
      True    False

     

    1. Life-cycle costs are all costs associated with a product during the production viewpoint.
      True    False

     

    1. JIT manufacturing eliminates waste by producing products only when, and in the quantities needed.
      True    False

     

    1. In JIT purchasing, materials are usually at warehouse long before they are needed.
      True    False

     

    1. A major difference between traditional and JIT environments is the degree of responsibility given to workers in the organization.
      True    False

     

    1. Acceptable quality level (AQL) allows defects to occur within predetermined parameters.
      True    False

     

    1. In a JIT environment, many overhead costs are directly traceable to products.
      True    False

     

    1. The structure for a JIT environment is a vastly complicated process costing system.
      True    False

     

    1. Accounting is simplified in the JIT system by the use of backflush costing.
      True    False

     

    1. In a job-order setting using JIT, repetitive business is separated from unique orders.
      True    False

     

    1. Choosing alternative strategies that provide long-term growth involves __________ decision making.
      ________________________________________

     

    1. The creation of customer value for same or lower cost than competitors is called __________ advantage.
      ________________________________________

     

    1. the difference between what the customer receives and gives up is the __________ .
      ________________________________________

     

    1. __________ analysis relies on identifying and exploiting internal and external linkages.
      ________________________________________

     

    1. The assignments to suppliers and customers that provide the best cost information needed are called __________ assignments.
      ________________________________________

     

    1. The length of time a product serves the needs of customers is called the __________ life.
      ________________________________________

     

    1. The stage during which a product loses market acceptance is called the __________ stage.
      ________________________________________

     

    1. The manufacturing system focused on reducing inventory levels and waste is called __________ manufacturing.
      ________________________________________

     

    1. In traditional and JIT environments using direct tracing, the manufacturing costs assigned to products are the direct materials costs and the __________ costs.
      ________________________________________

     

    1. Accounting for the cost accounting cycle in a JIT environment is simplified by using __________ costing.
      ________________________________________

     

    1. The strategy which involves choosing among alternative strategies with the goal of selecting a strategy or strategies that provides a company with reasonable assurance of long-term growth and survival is called:
      A. Competitive advantage
      B. Strategic cost management
      C. Strategic decision making
      D. Customer value

     

    1. The strategy to create better customer value for the same or lower cost than competitors or creating equivalent value for lower cost than offered by competitors is called:
      A. Strategic decision making
      B. Competitive advantage
      C. Strategic cost management
      D. Total product

     

    1. A competitive advantage has been established when
      A. customers see the variation as important and the value added to the customer exceeds the cost of providing differentiation.
      B. a high-cost strategy increases customer value by minimizing customer sacrifices.
      C. a low-profit item is dropped from the product line.
      D. both a and b.

     

    1. The difference between what a customer receives and what the customer gives up is called:
      A. Customer value
      B. Strategic cost management
      C. Competitive advantage
      D. Strategic decision making

     

    1. The total product, the complete range of benefits that a customer receives from a purchased product include(s):
      A. intangible benefits
      B. activity
      C. tangible benefits
      D. both a and c

     

    1. The use of cost data to develop and identify superior strategies that will produce a sustainable competitive advantage is called:
      A. Strategic decision making
      B. Competitive advantage
      C. Strategic cost management
      D. Customer value

     

    1. When a computer company maintains the internal storage space for a lower price, it is following a
      A. focusing strategy.
      B. cost leadership strategy.
      C. differentiation strategy.
      D. strategic positioning strategy.

     

    1. When a computer company increases the internal storage space for the same price, it is following a
      A. focusing strategy.
      B. low-cost strategy.
      C. differentiation strategy.
      D. strategic positioning strategy.

     

    1. When a computer company targets customers in the South, it is following a
      A. focusing strategy.
      B. low-cost strategy.
      C. differentiation strategy.
      D. strategic allocation strategy.

     

    1. When a computer company selects a mix of strategies in order to create sustainable competitive advantage, it is following a
      A. focusing strategy.
      B. low-cost strategy.
      C. differentiation strategy.
      D. strategic positioning strategy.

     

    1. The relationships among activities that are performed with a firm’s portion of the value chain is(are) called:
      A. Internal linkages
      B. External linkages
      C. Industrial value chain
      D. Both a and b

     

    1. The industrial value-chain analysis
      A. recognizes only complex linkages within the firm.
      B. is not compatible with differentiation strategies.
      C. determines a linked set of value-creating activities.
      D. requires a firm to operate across the entire value chain.

     

    1. The factor(s) that describe the relationships of a firm’s value chain activities that are performed with its suppliers and customers is(are) called:
      A. Internal linkages
      B. External linkages
      C. Industrial value chain
      D. Both a and b

     

    1. When a computer manufacturing company addresses supplier production problems, it is focusing on
      A. external linkages.
      B. internal linkages.
      C. a differentiation strategy.
      D. a cost leadership strategy.

     

    1. The structural and executional factors that determine the long-term cost structure of an organization are called:
      A. Organizational activities
      B. Operational cost drivers
      C. Operational activities
      D. Organizational cost drivers

     

    1. Structural and executional activities are types of
      A. organizational activities.
      B. operating activities.
      C. JIT.
      D. both a and b.

     

    1. Building plants, management structuring, and grouping employees are examples of
      A. executional activities.
      B. structural activities.
      C. operational activities.
      D. both a and b.

     

    1. The factors that drive the cost of day-to-day activities performed as a result of the structure and processes selected by the organization are called:
      A. Organizational activities
      B. Organizational cost drivers
      C. Operational cost drivers
      D. Operational activities

     

    1. Plant layout, quality management systems, and providing capacity are examples of
      A. executional activities.
      B. structural activities.
      C. operational activities.
      D. both a and b.

     

    1. The operational activity of moving inventory is classified as a
      A. unit-level activity.
      B. batch-level activity.
      C. product-level activity.
      D. facility-level activity.

     

    1. The operational activity of setting up equipment is classified as a
      A. unit-level activity.
      B. batch-level activity.
      C. product-level activity.
      D. facility-level activity.

     

    1. The operational activity of assembling parts is an example of a
      A. unit-level activity.
      B. batch-level activity.
      C. product-level activity.
      D. facility-level activity.

     

    1. The operational activity of redesigning products is classified as a
      A. unit-level activity.
      B. batch-level activity.
      C. product-level activity.
      D. facility-level activity.

     

    1. The operational activity of inspecting is classified as a
      A. unit-level activity.
      B. batch-level activity.
      C. product-level activity.
      D. facility-level activity.

     

    1. Activities required to design, develop, produce, market, distribute, and service a product are known as
      A. whole life activities.
      B. value-chain activities.
      C. target activities.
      D. overhead.

     

    1. The first link of the internal value chain is
      A. design.
      B. develop.
      C. market.
      D. distribute.

     

    1. The last link of the internal value chain is
      A. design.
      B. service.
      C. market.
      D. distribute.

     

    1. Analyzing how costs and other financial factors vary as different bundles of activities are considered to strengthen a firm’s strategic position is the process of
      A. exploiting linkages.
      B. design.
      C. cost driver analysis.
      D. distribution.

     

    1. The industry value chain includes
      A. shareholder value chain activities as well as firm activities.
      B. buyer and supplier value chain activities as well as firm activities.
      C. only firm activities.
      D. only firm production activities.

     

    1. Identifying profitable and unprofitable customers is an example of exploiting
      A. supplier linkages.
      B. the product life cycle.
      C. consumable life.
      D. customer linkages.

     

    1. Figure 11-1Ambrosia Corp. is a manufacturer of equipment used in manufacturing. It currently produces a product with 30 parts but through redesign has reduced the number of parts to 9. Then current activity capacity and demand for the 30 unit configuration and expected activity demand for the 9 part configuration are provided below:
    Activities Activity
    Driver
    Activity Capacity        Current
    Activity Demand
          Expected
    Activity Demand
    Materials
    usage
    number of parts 300,000 300,000 90,000
    Assembly direct labor hours 20,000 20,000 6,000
    Purchasing parts number of orders 20,000 16,000 8,000

    Materials usage has a rate of $6 per part and no fixed costs. Assembly has a rate of $20 per labor hour with no fixed component. Purchasing requires clerks that can process 5,000 purchase orders. Each clerk earns $40,000 per year. There is also a $1 per order processing cost.

    Refer to Figure 11-1. What is the savings in materials usage cost with the new design changes?
    A. $252,000
    B. $480,000
    C. $1,260,000
    D. $1,800,000

     

    1. Figure 11-1Ambrosia Corp. is a manufacturer of equipment used in manufacturing. It currently produces a product with 30 parts but through redesign has reduced the number of parts to 9. Then current activity capacity and demand for the 30 unit configuration and expected activity demand for the 9 part configuration are provided below:
    Activities Activity
    Driver
    Activity Capacity        Current
    Activity Demand
          Expected
    Activity Demand
    Materials
    usage
    number of parts 300,000 300,000 90,000
    Assembly direct labor hours 20,000 20,000 6,000
    Purchasing parts number of orders 20,000 16,000 8,000

    Materials usage has a rate of $6 per part and no fixed costs. Assembly has a rate of $20 per labor hour with no fixed component. Purchasing requires clerks that can process 5,000 purchase orders. Each clerk earns $40,000 per year. There is also a $1 per order processing cost.

    Refer to Figure 11-1. What is the cost savings from purchasing parts?
    A. $80,000
    B. $88,000
    C. $48,000
    D. $40,000

     

    1. Figure 11-1Ambrosia Corp. is a manufacturer of equipment used in manufacturing. It currently produces a product with 30 parts but through redesign has reduced the number of parts to 9. Then current activity capacity and demand for the 30 unit configuration and expected activity demand for the 9 part configuration are provided below:
    Activities Activity
    Driver
    Activity Capacity        Current
    Activity Demand
          Expected
    Activity Demand
    Materials
    usage
    number of parts 300,000 300,000 90,000
    Assembly direct labor hours 20,000 20,000 6,000
    Purchasing parts number of orders 20,000 16,000 8,000

    Materials usage has a rate of $6 per part and no fixed costs. Assembly has a rate of $20 per labor hour with no fixed component. Purchasing requires clerks that can process 5,000 purchase orders. Each clerk earns $40,000 per year. There is also a $1 per order processing cost.

    Refer to Figure 11-1. What is the total cost reduction of the new design?
    A. $2,208,000
    B. $2,194,000
    C. $1,628,000
    D. $1,624,000

     

    1. Figure 11-1Ambrosia Corp. is a manufacturer of equipment used in manufacturing. It currently produces a product with 30 parts but through redesign has reduced the number of parts to 9. Then current activity capacity and demand for the 30 unit configuration and expected activity demand for the 9 part configuration are provided below:
    Activities Activity
    Driver
    Activity Capacity        Current
    Activity Demand
          Expected
    Activity Demand
    Materials
    usage
    number of parts 300,000 300,000 90,000
    Assembly direct labor hours 20,000 20,000 6,000
    Purchasing parts number of orders 20,000 16,000 8,000

    Materials usage has a rate of $6 per part and no fixed costs. Assembly has a rate of $20 per labor hour with no fixed component. Purchasing requires clerks that can process 5,000 purchase orders. Each clerk earns $40,000 per year. There is also a $1 per order processing cost.

    Refer to Figure 11-1. If 10,000 units are being produced and the sales price is $500, what is the new sales price if the cost savings are passed on to the consumer?
    A. $129.80
    B. $317.40
    C. $237.00
    D. $337.20

     

    1. In activity-based costing, supplier costs
      A. must be narrower, including only the purchase price.
      B. are allocated to products arbitrarily.
      C. include costs of quality, reliability and timeliness and are assigned to products on a causal basis.
      D. all of these statements are true.

     

    1. Figure 11-2Blue Vibrance Company sells a product used in many manufacturing processes. The sales activity involves three activity areas:
    Activity Area Cost Driver and Rate
    Order taking $100 per purchase order
    Sales visits $50 per visit
    Delivery vehicles $1 per delivery mile

    The following customer information is given:

    AX BY DZ
    Units sold 100,000 80,000 60,000
    List price $50 $50 $50
    Actual sales price $45 $48 $50
    Number of purchase orders 30 20 10
    Number of sales visits 6 5 3
    Number of delivery miles 100 80 60

    Refer to Figure 11-2. Which customer is most profitable?
    A. AX
    B. BY
    C. DZ
    D. They are equally profitable.

     

    1. Figure 11-2Blue Vibrance Company sells a product used in many manufacturing processes. The sales activity involves three activity areas:
    Activity Area Cost Driver and Rate
    Order taking $100 per purchase order
    Sales visits $50 per visit
    Delivery vehicles $1 per delivery mile

    The following customer information is given:

    AX BY DZ
    Units sold 100,000 80,000 60,000
    List price $50 $50 $50
    Actual sales price $45 $48 $50
    Number of purchase orders 30 20 10
    Number of sales visits 6 5 3
    Number of delivery miles 100 80 60

    Refer to Figure 11-2. Which customer has the least activity costs?
    A. AX
    B. BY
    C. DZ
    D. They are the same.

     

    1. Figure 11-2Blue Vibrance Company sells a product used in many manufacturing processes. The sales activity involves three activity areas:
    Activity Area Cost Driver and Rate
    Order taking $100 per purchase order
    Sales visits $50 per visit
    Delivery vehicles $1 per delivery mile

    The following customer information is given:

    AX BY DZ
    Units sold 100,000 80,000 60,000
    List price $50 $50 $50
    Actual sales price $45 $48 $50
    Number of purchase orders 30 20 10
    Number of sales visits 6 5 3
    Number of delivery miles 100 80 60

    Refer to Figure 11-2. What is the profitability of customer BY?
    A. $4,000,000
    B. $3,840,000
    C. $3,837,670
    D. $2,330,000

     

    1. Which of the following are true about total quality control?
      A. Total quality control is an approach to differentiate and reduce overall quality costs.
      B. Total quality control demands production of defect-free products.
      C. Total quality control links suppliers closely with the firm.
      D. All of these statements are true about total quality control.

     

    1. Figure 11-3Awesome Products Company manufactures a product sold to retailers. It is considering suppliers for its process. The supplier quality involves four activity areas:
    Activity Area Cost Driver and Rate
    Order cost $120 per purchase order
    Defective units $200 per unit internal failure costs
    Delivery trips $5 per delivery mile
    Carrying cost $1 per order

    The following supplier information is given:

    X3 Y2 Z1
    Materials units needed 100,000 100,000 100,000
    Actual purchase price $5 $4.99 $5.01
    Number of purchase orders 20 30 18
    Number of defects 6 12 0
    Number of deliveries 20 30 18

    Refer to Figure 11-3. Which supplier is least costly?
    A. X3
    B. Y2
    C. Z1
    D. They are equally costly.

     

    1. Figure 11-3Awesome Products Company manufactures a product sold to retailers. It is considering suppliers for its process. The supplier quality involves four activity areas:
    Activity Area Cost Driver and Rate
    Order cost $120 per purchase order
    Defective units $200 per unit internal failure costs
    Delivery trips $5 per delivery mile
    Carrying cost $1 per order

    The following supplier information is given:

    X3 Y2 Z1
    Materials units needed 100,000 100,000 100,000
    Actual purchase price $5 $4.99 $5.01
    Number of purchase orders 20 30 18
    Number of defects 6 12 0
    Number of deliveries 20 30 18

    Refer to Figure 11-3. Which supplier has the most defective units?
    A. X3
    B. Y2
    C. Z1
    D. They are equal.

     

    1. Figure 11-3Awesome Products Company manufactures a product sold to retailers. It is considering suppliers for its process. The supplier quality involves four activity areas:
    Activity Area Cost Driver and Rate
    Order cost $120 per purchase order
    Defective units $200 per unit internal failure costs
    Delivery trips $5 per delivery mile
    Carrying cost $1 per order

    The following supplier information is given:

    X3 Y2 Z1
    Materials units needed 100,000 100,000 100,000
    Actual purchase price $5 $4.99 $5.01
    Number of purchase orders 20 30 18
    Number of defects 6 12 0
    Number of deliveries 20 30 18

    Refer to Figure 11-3. What is the cost of supplier Z1?
    A. $503,358
    B. $503,268
    C. $501,000
    D. $499,000

     

    1. The length of time that a product serves the needs of customers is called the:
      A. Product life cycle
      B. Revenue producing life
      C. Introduction stage
      D. Consumable life

     

    1. The time a product exists—from conception to abandonment is called the:
      A. Revenue producing life
      B. Product life cycle
      C. Consumable life
      D. Introduction stage

     

    1. The stage during which the product loses market acceptance is called the:
      A. decline stage
      B. growth stage
      C. maturity stage
      D. introduction stage

     

    1. The period of time when sales increase at a decreasing rate is called the:
      A. introduction stage
      B. growth stage
      C. decline stage
      D. maturity stage

     

    1. The stage characterized by preproduction and startup activities is called the:
      A. maturity stage
      B. growth stage
      C. introduction stage
      D. decline stage

     

    1. The period of time when sales increase at an increasing rate is called the:
      A. introduction stage
      B. maturity stage
      C. growth stage
      D. decline stage

     

    1. The viewpoint that describes the general sales pattern of a product as it passes through the introduction, growth, maturity, and decline stages is called the:
      A. Marketing viewpoint
      B. Customer viewpoint
      C. Production viewpoint
      D. Accounting viewpoint

     

    1. The viewpoint which defines stages of the life cycle by changes in the type of activities performed is called the:
      A. Accounting viewpoint
      B. Production viewpoint
      C. Customer viewpoint
      D. Marketing viewpoint

     

    1. Which stage in the marketing viewpoint is characterized by preproduction and startup activities?
      A. decline
      B. introduction
      C. growth
      D. maturity

     

    1. Which of the following is NOT a stage of the marketing viewpoint of the product life cycle?
      A. decline
      B. growth
      C. maturity
      D. production

     

    1. Which of the following is NOT a stage of the consumable life-cycle viewpoint?
      A. disposal
      B. maintaining
      C. logistics
      D. purchasing

     

    1. Life-cycle cost management consists of
      A. actions taken to enable a product to be designed, developed, produced, marketed, distributed, operated, maintained, serviced, and disposed of in order to maximize profits.
      B. actions to extend the life of a product through design, development, production, and maintenance.
      C. actions that focus on minimizing the cost of developing, designing, producing, distributing, operating, servicing, and disposal of a product.
      D. actions taken to design, develop, test, market, distribute, maintain, service, and dispose of a product to maximize revenues.

     

    1. Which of the following is NOT a stage of the production life-cycle viewpoint?
      A. design
      B. introduction
      C. research
      D. testing

     

    1. Which of the life-cycle viewpoints is the revenue-oriented viewpoint?
      A. consumable life-cycle viewpoint
      B. production viewpoint
      C. marketing viewpoint
      D. planning viewpoint

     

    1. Which of the following is NOT a stage of the production life-cycle viewpoint?
      A. planning
      B. production
      C. purchasing
      D. logistics

     

    1. Which of the life-cycle viewpoints is the cost-oriented viewpoint?
      A. product life-cycle
      B. consumable life-cycle
      C. production life-cycle
      D. planning life-cycle

     

    1. Which viewpoint of the product life-cycle is customer-value oriented?
      A. production life-cycle
      B. marketing life-cycle
      C. consumable life-cycle
      D. planning life-cycle

     

    1. Which stage of the marketing life-cycle has slow sales growth with peak sales?
      A. introduction
      B. growth
      C. maturity
      D. decline

     

    1. At which stage of the consumable life-cycle is price sensitivity low?
      A. introduction
      B. growth
      C. maturity
      D. decline

     

    1. According to the authors, 90 percent or more of a product’s life-cycle costs are determined during
      A. growth stage.
      B. development stage.
      C. decline stage.
      D. maturity stage.

     

    1. Information for life-cycle cost management is supported by a(n)
      A. functional-based costing system.
      B. activity-based costing system.
      C. normal costing system.
      D. all of these.

     

    1. Life-cycle cost management emphasizes
      A. cost control.
      B. cost reduction.
      C. normal costing.
      D. process costing.

     

    1. The difference between the sales price needed to capture a predetermined market share and the desired profit per unit is called:
      A. Gross profit
      B. Target market
      C. Target price
      D. Target cost

     

    1. Figure 11-4the Algonquin Company developed the following budgeted life-cycle income statement for two proposed products. Each product’s life cycle is expected to be two years.
    Product A Product B Total
    Sales $280,000 $200,000 $480,000
    Cost of goods sold  200,000  130,000  330,000
    Gross profit $ 80,000 $ 70,000 $150,000
    Period expenses:
         Research and development (70,000)
         Marketing  (50,000)
    Life-cycle income $ 30,000

    A 10 percent return on sales is required for new products. Because the proposed products did not have a 10 percent return on sales, the products were going to be dropped.

    Relative to Product B, Product A requires more research and development costs but fewer resources to market the product. Sixty percent of the research and development costs are traceable to Product A, and 30 percent of the marketing costs are traceable to Product A.

    Refer to Figure 11-4. If research and development costs and marketing costs are traced to each product, life-cycle income for Product A would be
    A. $15,000.
    B. $23,000.
    C. $27,000.
    D. $38,000.

     

    1. Figure 11-4the Algonquin Company developed the following budgeted life-cycle income statement for two proposed products. Each product’s life cycle is expected to be two years.
    Product A Product B Total
    Sales $280,000 $200,000 $480,000
    Cost of goods sold  200,000  130,000  330,000
    Gross profit $ 80,000 $ 70,000 $150,000
    Period expenses:
         Research and development (70,000)
         Marketing  (50,000)
    Life-cycle income $ 30,000

    A 10 percent return on sales is required for new products. Because the proposed products did not have a 10 percent return on sales, the products were going to be dropped.

    Relative to Product B, Product A requires more research and development costs but fewer resources to market the product. Sixty percent of the research and development costs are traceable to Product A, and 30 percent of the marketing costs are traceable to Product A.

    Refer to figure 11-4. If research and development costs and marketing costs are traced to each product, life-cycle income for Product B would be
    A. $35,000.
    B. $7,000.
    C. $12,000.
    D. $20,000.

     

    1. Figure 11-4the Algonquin Company developed the following budgeted life-cycle income statement for two proposed products. Each product’s life cycle is expected to be two years.
    Product A Product B Total
    Sales $280,000 $200,000 $480,000
    Cost of goods sold  200,000  130,000  330,000
    Gross profit $ 80,000 $ 70,000 $150,000
    Period expenses:
         Research and development (70,000)
         Marketing  (50,000)
    Life-cycle income $ 30,000

    A 10 percent return on sales is required for new products. Because the proposed products did not have a 10 percent return on sales, the products were going to be dropped.

    Relative to Product B, Product A requires more research and development costs but fewer resources to market the product. Sixty percent of the research and development costs are traceable to Product A, and 30 percent of the marketing costs are traceable to Product A.

    Refer to Figure 11-4. Return on sales for Product A would be
    A. 40.0%.
    B. 25.0%.
    C. 8.2%.
    D. 2.5%.

     

    1. Lavalier Company developed the following budgeted life-cycle income statement for two proposed products. Each product’s life cycle is expected to be two years.
    Product AA Product BB Total
    Sales $400,000 $350,000 $750,000
    Cost of goods sold  300,000  200,000  500,000
    Gross profit $100,000 $150,000 $250,000
    Period expenses:
         Research and development (100,000)
         Marketing  (75,000)
    Life-cycle income $ 75,000

    A 12 percent return on sales is required for new products. Because the proposed products did not have a 12 percent return on sales, the products were going to be dropped.

    Relative to Product BB, Product AA requires more research and development costs but fewer resources to market the product. Sixty-five percent of the research and development costs are traceable to Product AA, and 40 percent of the marketing costs are traceable to Product AA.

    If research and development costs and marketing costs are traced to each product, life-cycle income for Product AA would be
    A. $3,000.
    B. $100,000.
    C. $35,000.
    D. $5,000.

     

    1. Lavalier Company developed the following budgeted life-cycle income statement for two proposed products. Each product’s life cycle is expected to be two years.
    Product AA Product BB Total
    Sales $400,000 $350,000 $750,000
    Cost of goods sold  300,000  200,000  500,000
    Gross profit $100,000 $150,000 $250,000
    Period expenses:
         Research and development (100,000)
         Marketing  (75,000)
    Life-cycle income $ 75,000

    A 12 percent return on sales is required for new products. Because the proposed products did not have a 12 percent return on sales, the products were going to be dropped.

    Relative to Product BB, Product AA requires more research and development costs but fewer resources to market the product. Sixty-five percent of the research and development costs are traceable to Product AA, and 40 percent of the marketing costs are traceable to Product AA.

    If research and development costs and marketing costs are traced to each product, life-cycle income for Product BB would be
    A. $70,000.
    B. $90,000.
    C. $105,000.
    D. $150,000.

     

    1. Luminous Company sells a product for $450 per unit. Its market share is 25 percent. The marketing manager feels that the market share can be increased to 33 percent with a reduction in price to $390. The product is currently earning a profit of $72 per unit. The president of Luminous Company feels that the $72 profit per unit must be maintained. What is the target price per unit?
      A. $378
      B. $450
      C. $318
      D. $390

     

    1. Luminous Company sells a product for $450 per unit. Its market share is 25 percent. The marketing manager feels that the market share can be increased to 33 percent with a reduction in price to $390. The product is currently earning a profit of $72 per unit. The president of Luminous Company feels that the $72 profit per unit must be maintained. What is the original cost per unit?
      A. $390
      B. $450
      C. $378
      D. $318

     

    1. Dot Company sells a product for $225 per unit. Its market share is 20 percent. The marketing manager feels that the market share can be increased to 30 percent with a reduction in price to $195. The product is currently earning a profit of $36 per unit. The president of Dot Company feels that the $36 profit per unit must be maintained. What is the target price per unit?
      A. $195
      B. $225
      C. $189
      D. $159

     

    1. Dot Company sells a product for $225 per unit. Its market share is 20 percent. The marketing manager feels that the market share can be increased to 30 percent with a reduction in price to $195. The product is currently earning a profit of $36 per unit. The president of Dot Company feels that the $36 profit per unit must be maintained. What is the original cost per unit?
      A. $225
      B. $195
      C. $159
      D. $189

     

    1. Dot Company sells a product for $225 per unit. Its market share is 20 percent. The marketing manager feels that the market share can be increased to 30 percent with a reduction in price to $195. The product is currently earning a profit of $36 per unit. The president of Dot Company feels that the $36 profit per unit must be maintained. What is the target cost per unit?
      A. $159
      B. $195
      C. $189
      D. $225

     

    1. The manufacturing which reduces inventory levels because production is geared to demand is called:
      A. Traditional
      B. Conventional
      C. Extraordinary
      D. JIT

     

    1. Traditional manufacturing uses which of the following philosophies of quality control?
      A. zero defects
      B. total quality control
      C. acceptable quality level
      D. both a and b

     

    1. Which of the following is a trait of a traditional manufacturing system?
      A. push-through system
      B. value-chain focus
      C. total quality control
      D. high employee involvement

     

    1. Which of the following is NOT a trait of a traditional manufacturing system?
      A. push-through system
      B. short-term supplier contracts
      C. value-added focus
      D. total quality control

     

    1. Which of the following is a trait of a JIT system?
      A. push-through system
      B. significant inventory
      C. buyers’ market
      D. large supplier base

     

    1. JIT manufacturing differs from traditional manufacturing in all of the following ways EXCEPT
      A. the treatment of direct materials and direct labor for product costing.
      B. the level of inventories.
      C. the approach to quality control.
      D. the physical layout of the manufacturing process.

     

    1. JIT manufacturing uses which of the following philosophies of quality control?
      A. just-in-case (JIC)
      B. acceptable quality level (AQL)
      C. total quality control (TQC)
      D. both a and c

     

    1. Which of the following is NOT a trait of a JIT system?
      A. acceptable quality level
      B. long-term contracts
      C. multi-skilled labor
      D. high employee involvement

     

    1. The goal of total quality control is
      A. to have less defective material than good material.
      B. to permit defects as long as they do not exceed a certain level.
      C. to have zero defects.
      D. both b and c.

     

    1. The approach to quality control which attempts to achieve zero defects is called:
      A. traditional
      B. acceptable quality level
      C. total quality control
      D. marginal control

     

    1. the traditional approach of permitting defects to occur as long as they do NOT exceed a certain level is called
      A. Total quality control
      B. Zero defects
      C. Acceptable quality level
      D. Both a and c

     

    1. If traditional manufacturing is used, which of the following is considered direct costs?
      A. setup costs
      B. direct labor
      C. maintenance of machinery
      D. inspection costs

     

    1. In a JIT manufacturing environment, product-costing information is used mainly for all of the following EXCEPT
      A. product costing of inventory for financial reporting purposes.
      B. pricing decisions.
      C. product profitability analysis.
      D. make-or-buy decisions.

     

    1. Which of the following manufacturing costs is assigned to products in a traditional environment using direct tracing?
      A. supervision
      B. materials
      C. repairs and maintenance
      D. energy

     

    1. Which of the following manufacturing costs is assigned to products in a traditional and JIT environment using direct tracing?
      A. direct materials
      B. direct labor
      C. operating supplies
      D. both a and b

     

    1. If JIT manufacturing is used and each manufacturing cell produces a single product, which of the following is considered a direct product cost?
      A. inspection costs
      B. materials
      C. setup costs
      D. all of these

    Chapter 13–The Balanced Scorecard: Strategic-Based Control

    Student: ___________________________________________________________________________

    1. Activity-based responsibility accounting focuses on processes and uses both operational and financial measures.
      True    False

     

    1. Activity-based responsibility accounting employs dynamic standards and emphasizes and supports continuous improvement.
      True    False

     

    1. A strategic-based responsibility accounting system transforms the strategy of a company into operational objectives and measures.
      True    False

     

    1. The most common form of strategic-based responsibility accounting system is the worksheet.
      True    False

     

    1. In a strategic-based responsibility accounting system, stretch targets are established for individual performance measures.
      True    False

     

    1. The balanced scorecard is a strategic-based performance management system that identifies four perspectives.
      True    False

     

    1. Strategy translation means specifying objectives and percentage of revenues from sale of products.
      True    False

     

    1. The customer perspective defines the customer and market segments in which the business unit will compete.
      True    False

     

    1. Customer value is the sum of realization and sacrifice what the customer gives up and receives.
      True    False

     

    1. Strategic information availability include processes with real-time feedback.
      True    False

     

    1. Performance measures are derived from a company’s vision, strategy, and objectives.
      True    False

     

    1. To link measures to a strategy, they must be derived from management and be balanced.
      True    False

     

    1. Double-loop feedback occurs when managers get information about the effectiveness and the validity of the strategy.
      True    False

     

    1. The strategy map connects the balanced scorecard strategy with an organization’s administration.
      True    False

     

    1. A testable strategy is a set of linked objectives aimed at an overall goal.
      True    False

     

    1. In order for the balanced scorecard to succeed, the entire organization must be behind it.
      True    False

     

    1. Articulation of the balanced scorecard should not be made to individuals within the organization.
      True    False

     

    1. Incentives must be structured and resources allocated to support the strategy chosen.
      True    False

     

    1. Performance expectations must be established once objectives and measures have been executed and advertised.
      True    False

     

    1. Compensation should be based on performance and paid based on percentage of objective achieved.
      True    False

     

    1. Outcome measures that are a result of past efforts are called __________ measures.
      ________________________________________

     

    1. Outcome measures that are expressed in monetary terms are called __________ measures.
      ________________________________________

     

    1. Dissatisfied customers are an example of a __________ measure.
      ________________________________________

     

    1. The targets aimed at transforming the organization within a period of 3 to 5 years are called __________ targets.
      ________________________________________

     

    1. Choosing general goals, customer segment, and nature of a business are all concern of strategy __________ .
      ________________________________________

     

    1. Setting balanced objectives, target values, and rewards are steps in developing the __________ .
      ________________________________________

     

    1. Training hours is an example of a(n) __________ measure.
      ________________________________________

     

    1. A set of linked objectives aimed at an overall goal is the definition of a __________ strategy.
      ________________________________________

     

    1. For strategic alignment, incentive compensation should be based on __________ performance, compared to target values.
      ________________________________________

     

    1. In a balanced scorecard, performance expectations are communicated by setting __________ .
      ________________________________________

     

    1. Activity-based responsibility accounting adds which of the following to the financial-based responsibility accounting perspective?
      A. consumer perspective
      B. functional perspective
      C. process perspective
      D. learning perspective

     

    1. A competitive environment means that organizations will be
      A. producing increasingly high-volume, low-variety products and services.
      B. focused internally on efficiency.
      C. managing cause and effect linkages to customer satisfaction.
      D. viewing their actions independent of competitors, suppliers, and customers.

     

    1. Which type of responsibility accounting addresses directed continuous improvement in environments that consist of competitive conditions and dynamic change?
      A. activity-based responsibility accounting
      B. functional-based responsibility accounting
      C. process-based responsibility accounting
      D. strategic-based responsibility accounting

     

    1. Which of the following is NOT true about activity-based responsibility accounting?
      A. The emphasis changes from cost reduction through change to cost control.
      B. The emphasis includes financial results as well as how things are done.
      C. Responsibility moves from one dimension to two dimensions.
      D. It moves from a control system to a performance management system.

     

    1. What are the two additional perspectives that are added to the activity-based approach to achieve strategic-based responsibility?
      A. a customer perspective and a learning and growth perspective
      B. an infrastructure perspective and a process perspective
      C. a customer perspective and a financial perspective
      D. a financial perspective and a process perspective

     

    1. Which of the following is NOT a limitation of activity-based responsibility accounting?
      A. Change efforts are often fragmented.
      B. Change efforts lack connection to mission.
      C. Change efforts lack connection to strategy.
      D. Change efforts are driven by value-added analysis.

     

    1. Directed continuous improvement is accomplished by linking initiatives to
      A. processes.
      B. strategy and mission.
      C. financial outcomes.
      D. measures.

     

    1. Which of the following is NOT an advantage of strategic-based responsibility accounting?
      A. It includes perspectives that serve as a source of competitive advantage.
      B. Responsibility is centralized within the organization.
      C. Change efforts are directed by the mission and strategy.
      D. All are advantages of strategic-based responsibility accounting.

     

    1. Which of the following is a perspective of strategic-based responsibility accounting but is NOT a perspective of activity-based responsibility accounting?
      A. financial perspective
      B. process perspective
      C. customer perspective
      D. all of the above

     

    1. The most common strategic-based performance management system is
      A. variance analysis with standard costs as benchmarks.
      B. the balanced scorecard.
      C. financial budgets.
      D. all of the above.

     

    1. The balanced scorecard
      A. is an activity-based responsibility accounting model that measures operating activities.
      B. is a financial-based responsibility accounting model that focuses on the financial performance of units, rewarding performance with static financial-oriented standards.
      C. is a strategic-based financial reporting system that balances assets with liabilities and owner’s equity.
      D. is a strategic-based performance management system that identifies objectives and measures from a financial perspective, customer perspective, process perspective, and learning and growth perspective.

     

    1. Lead measures are critical to strategy because
      A. they are based on actual activity.
      B. they are an independent part of the system.
      C. there should be a causal linkage with strategy.
      D. they are outcome measures.

     

    1. A major difference between activity-based responsibility accounting and strategic-based responsibility accounting is
      A. only strategic-based responsibility accounting is linked to strategy.
      B. only strategic-based responsibility accounting is focused on systemwide efficiency.
      C. only strategic-based responsibility accounting includes the process perspective.
      D. only strategic-based responsibility accounting reinforces team accountability.

     

    1. Which feature is related solely to strategic-based responsibility and not to activity-based responsibility?
      A. financial perspective
      B. process perspective
      C. team accountability
      D. customer perspective

     

    1. Which is a major difference between activity-based measures and strategic-based measures?
      A. Strategic-based measures are linked to strategy.
      B. Strategic-based measures are used to align objectives.
      C. Strategic-based measures are balanced measures.
      D. all of the above.

     

    1. Which of the following statements is true regarding lag measures?
      A. lag measures are measures that relate to customers
      B. lag measures are factors that drive future performance
      C. lag measures are performance drivers
      D. lag measures include measures such as customer profitability

     

    1. The outcome measures that are expressed in monetary terms are called:
      A. Objective measures
      B. External measures
      C. Lag measures
      D. Financial measures

     

    1. For a firm to have balanced measures, the measures selected must be balanced between
      A. lag and lead measures.
      B. objective and subjective measures.
      C. financial and nonfinancial measures.
      D. all of the above.

     

    1. The outcome measures that are a result of past efforts are called:
      A. Objective measures
      B. External measures
      C. Lag measures
      D. Financial measures

     

    1. The outcome measures that can be readily quantified and verified are called:
      A. External measures
      B. Objective measures
      C. Financial measures
      D. Lag measures

     

    1. The outcome measures that relate to customers are called:
      A. External measures
      B. Objective measures
      C. Financial measures
      D. Lag measures

     

    1. Which of the following would be a nonfinancial measure?
      A. customer profitability
      B. dissatisfied customers
      C. return on investment
      D. cost per unit

     

    1. Which of the following would be an external measure?
      A. return on investments
      B. employee satisfaction
      C. process efficiency
      D. all of the above

     

    1. Which of the following would be a subjective measure?
      A. employee capabilities
      B. market share
      C. return on investment
      D. cost per unit

     

    1. Which of the following would NOT be an objective measure?
      A. customer profitability
      B. employee capabilities
      C. return on investment
      D. cost per unit

     

    1. Which of the following would be a lead measure?
      A. customer profitability
      B. cost per employee
      C. return on investment
      D. employee training hours

     

    1. Lead measures
      A. are the measures with the highest priority.
      B. are generic to different strategies.
      C. are based on performance drivers.
      D. represent the desired outcomes.

     

    1. Which of the following would be a lag measure?
      A. budget forecasts
      B. sales per employee
      C. plant investment
      D. employee training hours

     

    1. Which of the following features make stretch targets feasible?
      A. The targets are set in isolation by top management.
      B. The measures are linked by causal relationships.
      C. The measures are based on currently attainable standard costs.
      D. The targets are set at desired levels for twenty years to ensure long-term performance.

     

    1. Communicating strategy through measurements requires both scope and flexibility. Which of the following statements is true?
      A. Flexibility requires subjective and objective measurement as well as nonfinancial measures.
      B. Flexibility requires that measures be optimal and dynamic.
      C. Scope implies that internal and external measures are needed.
      D. Both a and c are true.

     

    1. Which of the following statements comparing activity-based performance and strategic-based performance evaluation is NOT true?
      A. Strategic-based performance evaluation expands the set of metrics.
      B. Only strategic-based performance evaluation leads to cost reductions.
      C. Only strategic-based performance standards set stretch targets for all four perspectives.
      D. Both systems encourage quality improvements.

     

    1. Stretch targets are
      A. aimed at stretching the firm’s resources.
      B. aimed at static standards.
      C. aimed at transforming the organization within three to five years if achieved.
      D. aimed at transforming the organization immediately.

     

    1. Which of the following is not a strategic theme of the financial perspective?
      A. revenue growth
      B. asset utilization
      C. employee capability
      D. risk management

     

    1. Business strategy is concerned with
      A. choosing market and customer segments.
      B. identifying critical internal and business processes.
      C. selecting individual and organizational properties required.
      D. all of the above.

     

    1. Strategy translation is concerned with
      A. choosing general goals.
      B. choosing the customer segments.
      C. identifying measures, targets, and initiatives.
      D. choosing the nature of the business.

     

    1. Which of the following is NOT a step in developing the Balanced Scorecard?
      A. setting balanced objectives
      B. outlining control procedures
      C. setting target values
      D. rewards

     

    1. In the financial perspective, economic value added would be an appropriate measure for
      A. revenue growth.
      B. cost reduction.
      C. improving asset utilization.
      D. risk management.

     

    1. Objectives for increasing revenue growth include
      A. adopting a new pricing strategy.
      B. reducing the cost per unit.
      C. eliminating non-value-added activities.
      D. reducing distribution channel cost.

     

    1. Which of the following is NOT a measure commonly used to evaluate asset utilization?
      A. return on investment
      B. economic value added
      C. market share
      D. all of the above

     

    1. Diversifying customers and product lines are initiatives important to
      A. revenue growth.
      B. cost reduction.
      C. asset utilization.
      D. risk management.

     

    1. In the customer perspective, objectives and measures that drive the creation of customer value are
      A. customer survey ratings.
      B. post-purchase cost.
      C. on-time deliveries.
      D. all of the above.

     

    1. On-time delivery performance is calculated as
      A. orders delivered on time/total number of orders delivered.
      B. orders delivered on time/total sales dollars.
      C. orders delivered on time/total production.
      D. orders delivered/orders delivered on time.

     

    1. Increasing customer value occurs when
      A. the customer receives more benefits.
      B. the customer perceives a greater gap between benefits and sacrifice.
      C. customer costs are reduced.
      D. none of the above.

     

    1. In the Balanced Scorecard system, core objectives and measures
      A. are common across all organizations.
      B. are common across all scorecard perspectives.
      C. are common across departments.
      D. none of the above.

     

    1. From the customer perspective, which of the following might be considered a core objective rather than a performance value?
      A. decrease price
      B. increase customer retention
      C. improve image
      D. improve product quality

     

    1. From the customer perspective, which of the following might be an appropriate measure for improving product quality?
      A. customer profitability
      B. cost per customer
      C. percentage of returns
      D. number of patents pending

     

    1. An operational measure of quality is
      A. defects per unit.
      B. number of defective units.
      C. pounds of scrap.
      D. all of the above.

     

    1. The formula for computing Manufacturing Cycle Efficiency (MCE) is
      A. Processing Time / (Processing time + Move time + Inspection time + Waiting time + Other non-value-added time).
      B. Theoretical Capacity / Production hours available.
      C. Cycle time per unit ´ velocity.
      D. none of the above.

     

    1. The time it takes to produce one unit of product is called
      A. velocity.
      B. delivery time.
      C. cycle time.
      D. turnover.

     

    1. Cycle time is
      A. the time it takes to collect the account after the sale.
      B. the time it takes to turn inventory over.
      C. the time it takes to deliver the product after it is sold.
      D. the time it takes to produce one unit of product.

     

    1. The number of units that can be produced in a given period of time is called
      A. turnover.
      B. cycle time.
      C. velocity.
      D. efficiency.

     

    1. Delivery performance can be improved by
      A. decreasing cycle time.
      B. increasing cycle time.
      C. decreasing velocity.
      D. increasing turnover.

     

    1. A manufacturing cell has the theoretical capability of producing 40,000 microchips per quarter. The conversion cost per quarter is $25,000. There are 4,000 production hours available within the cell per quarter.The theoretical velocity per hour is
      A. 25.00 units.
      B. 16.00 units.
      C. 10.00 units.
      D. 2.24 units.

     

    1. Which of the following might be a measure of employee motivation, empowerment, and alignment?
      A. process efficiency
      B. suggestions per employee
      C. customer satisfaction
      D. units product cost

     

    1. Which of the following is NOT a major enabling factor of the learning and growth perspective?
      A. customer attributes
      B. information system capabilities
      C. employee attitudes
      D. employee capabilities

     

    1. At the beginning of 2014, Terrapin Company installed a JIT purchasing and manufacturing system. The following information has been gathered about one of the company’s products:
    Theoretical annual capacity 3,500
    Actual production 1,800
    Production hours available 700
    Actual conversion cost per hour $10

    The theoretical velocity per hour is
    A. 1.3 units.
    B. 4.5 units.
    C. 1.4 units.
    D. 5.0 units.

     

    1. At the beginning of 2014, Terrapin Company installed a JIT purchasing and manufacturing system. The following information has been gathered about one of the company’s products:
    Theoretical annual capacity 3,500
    Actual production 1,800
    Production hours available 700
    Actual conversion cost per hour $10

    What is the ideal conversion cost per unit?
    A. $1.02 per unit.
    B. $29.10 per unit.
    C. $2.00 per unit.
    D. $32 per unit.

     

    1. Homegrown, Inc., manufactures a product that experiences the following activities:
    Processing (three departments) 60 hours
    Moving (four moves) 15 hours
    Waiting time 45 hours
    Storage time (before delivery) 120 hours

    The MCE for the product is
    A. 0.33.
    B. 0.25.
    C. 0.27.
    D. 0.18.

     

    1. A manufacturing cell has the theoretical capability of producing 40,000 microchips per quarter. The conversion cost per quarter is $25,000. There are 4,000 production hours available within the cell per quarter. The theoretical cycle time per unit in minutes is
      A. 0.625 minutes.
      B. 6.000 minutes.
      C. 8.400 minutes.
      D. 37.500 minutes.

     

    1. At the beginning of 2014, Haroldson Company installed a JIT purchasing and manufacturing system. The following information has been gathered about one of the company’s products.
    Theoretical annual capacity 9,000
    Actual production 3,600
    Production hours available 3,000
    Actual cost per unit $33

    The theoretical velocity per hour is
    A. 3.0 units.
    B. 2.8 units.
    C. 1.5 units.
    D. 1.55units.

     

    1. At the beginning of 2014, Haroldson Company installed a JIT purchasing and manufacturing system. The following information has been gathered about one of the company’s products.
    Theoretical annual capacity 9,000
    Actual production 3,600
    Production hours available 3,000
    Actual cost per unit $33

    What is the ideal conversion cost per unit?
    A. $39.60 per unit.
    B. $16.50 per unit.
    C. $99 per unit
    D. $11 per unit.

     

    1. Mobility, Inc., manufactures a product that experiences the following activities:
    Processing (three departments) 18 hours
    Moving (four moves) 2 hours
    Waiting time 14 hours
    Storage time (before delivery) 26 hours

    The MCE for the product is
    A. 0.48.
    B. 0.30.
    C. 0.42.
    D. 0.45.

     

    1. The perspective that defines the capabilities needed by the organization to create long-term improvement is the
      A. financial perspective.
      B. customer perspective.
      C. process perspective.
      D. learning and growth perspective.

     

    1. Which of the following would NOT be a core outcome measure for employee capabilities?
      A. employee satisfaction ratings
      B. number of employees
      C. employee turnover
      D. employee productivity

     

    1. Which of the following would be considered a lead measure for employee capabilities?
      A. employee satisfaction
      B. employee turnover
      C. employee productivity
      D. number of training hours

     

    1. The learning and growth perspective has three major objectives. Which of the following is an objective of the learning and growth process?
      A. increase the number of new products
      B. increase customer acquisition
      C. increase motivation and alignment
      D. improve asset utilization

     

    1. Double-loop feedback occurs under what conditions?
      A. When managers receive information about both the effectiveness of strategy implementation as well as the validity of assumptions.
      B. When managers receive feedback information from two information sources.
      C. When managers validate the feedback information by double checking it.
      D. When managers receive information about the effectiveness of the controls and the effectiveness of the implementation.

     

    1. Which of the following would not be an outcome measure?
      A. net income
      B. market share
      C. return on investment
      D. training hours

     

    1. The critical performance measures of the Balanced Scorecard have some special properties. Which of the following is NOT one of those properties?
      A. scorecard measures are linked by cause-and-effect relationships
      B. performance measures are derived from strategy
      C. benchmarking plays a critical role
      D. performance measures should be balanced between outcome and lead measures

     

    1. Failure of a strategy might be due to
      A. incorrect calculations.
      B. incorrect feedback.
      C. implementation problems.
      D. invalid controls.

     

    1. A testable strategy is defined as
      A. a strategy that can be implemented.
      B. a set of profit goals.
      C. a set of linked objectives aimed at an overall goal.
      D. a strategy that is verifiable.

     

    1. A testable strategy can be constructed
      A. by prioritizing objectives.
      B. by sequencing if-then statements.
      C. by creating alternative scenarios.
      D. by creating lead measures.

     

    1. A strategy map
      A. links the cause-and-effect relationships in the proposed strategy, creating a testable strategy.
      B. maps the organization’s strategies over time.
      C. documents the performance results of an organization.
      D. strategizes about the organization’s competitors.

     

    1. Double-loop feedback can be defined as
      A. feedback that deals with both the effectiveness of strategy implementation and the validity of the assumptions underlying the strategy.
      B. feedback that emphasizes the effectiveness of strategy implementation and the costs of implementation.
      C. feedback that emphasizes the validity and assumptions underlying the strategy and the costs of the strategy.
      D. feedback on lead indicators and lag indicators.

     

    1. If only the return on investment were used to measure performance, it would be considered
      A. double-loop feedback.
      B. triple-loop feedback.
      C. a testable strategy.
      D. single-loop feedback.

     

    1. A balanced scorecard is designed to bring about organizational change. Which of the following is a means of alignment?
      A. Employees must share ownership of objectives, measures, targets, and initiatives.
      B. Incentives must be structured to support strategy.
      C. Resources must be allocated to support strategy.
      D. all of the above.

     

    1. The balanced scorecard becomes a means of communicating the strategy of the organization to its employees and managers. What might be a downside of communicating this information?
      A. Employees will need direction about what is to be done.
      B. Employees will need to understand where the organization is headed.
      C. Sensitive information may end up in the hands of competitors.
      D. all of the above.

     

    1. Which of the following is NOT a condition that must be present for a strategy to become attainable?
      A. budgetary process must provide the resources necessary to carry out the initiatives
      B. resources must be allocated to strategic initiatives
      C. the organization must decide how much of the strategic targets will be achieved for the coming year
      D. all are conditions that must be met for strategy to become actionable

     

    1. Performance expectations are communicated by setting
      A. new initiatives.
      B. targets.
      C. a strategic vision.
      D. activity measures.

     

    1. For purposes of strategic alignment, incentive compensation should be based upon
      A. expected performance of weighted targets for a given period.
      B. expected financial performance of the company.
      C. actual performance compared to weighted target values for a given period.
      D. actual financial performance of the company.

     

    1. Compare and contrast activity-based measures and strategic-based measures.

     

     

     

     

     

    1. Activity-based responsibility and strategic-based responsibility incorporate some of the same elements. However, strategic-based responsibility adds some new elements to the common dimensions. What are the elements in common and what new elements are included?

     

     

     

     

     

    1. Activity-based evaluation and strategic-based evaluation incorporate some of the same elements. However, strategic-based responsibility adds some new elements to the common dimensions. What are the elements in common and what new elements are included?

     

     

     

     

     

    1. Strategic-based performance measures are balanced measures. Give examples of four types of balanced measures.

     

     

     

     

     

    1. The following measures belong to one of four perspectives on the balanced scorecard:1      Return on investment
      2      Time to market
      3      Number of new customers
      4      Percentage of revenues from new sources
      5      Quality costs
      6      Employee productivityRequired:

      a.      Identify the perspective appropriate for each measure listed above.
      b.      Suggest a possible strategic objective that might be associated with each measure.

     

     

     

     

     

    1. Mendocino Company would like to increase its operational efficiency. For the first quarter of operations during the current year, the following data were reported:
    Days
    Inspection time 0.4
    Process time 3.9
    Move time 1.1
    Wait time 4.9

    Required:

    a. Compute the manufacturing cycle efficiency (MCE) for the quarter.
    b. If by use of JIT all wait time during production is eliminated, what will be the new MCE?
    (round to two decimal places if necessary)

     

     

     

     

     

     

    1. The following measures belong to one of four perspectives on the balanced scorecard:1      Satisfaction of customer
      2      Satisfaction of employees
      3      Cycle time
      4      Product cost per unitRequired:

      a.      Identify the perspective appropriate for each measure listed above.
      b.      Suggest a possible strategic objective that might be associated with each measure.

     

     

     

     

     

    1. Montepulciano Industries is planning to change its manufacturing plant by automating and installing a flexible manufacturing system. The company is also changing its performance measures as well as its operating procedures. In an effort to evaluate performance and determine where improvements can be made, management has gathered the following data relating to activities over the last four months:
    Month
       1       2       3       4   
    Quality Control Measures:
       Number of defects 191 161 122 93
       Number of warranty claims 56 33 33 29
       Number of customer complaints 107 93 71 57
    Material Control Measures:
       Purchase order lead time 9 days 87 days 6 days 4 days
       Scrap as a percentage of total cost 1% 2% 3% 4%
    Machine Performance Measures:
       Percentage of machine downtime 2% 4% 4% 7%
       Use as a percentage of availability 96% 91% 89% 87%
       Setup time (hours) 6 9 10 13
    Delivery Performance Measures:
       Throughput time (days) 6.0 7.5 9.0 10.0
       Delivery cycle time (days) 15.0 19.0 21.0 24.0
       Manufacturing cycle efficiency 35.0% 26.7% 21.1% 18.0%
       Percentage on-time deliveries 97% 95% 92% 84%
       Total units 4,221 4,089 3,818 3,705

    Many of these measures are new and the president has asked you to interpret the results. Throughput is the time it takes to turn materials into a completed product. Delivery cycle time is the time between receiving an order and shipping the goods.

    Required:

    Using the performance measures given, do the following:

    a. Identify the areas where the company seems to be improving.
    b. Identify the areas where the company seems to be deteriorating.

     

     

     

     

     

     

    1. How does the Balanced Scorecard communicate strategy to the organization? How is strategy translated into performance measures?

     

     

     

     

     

    1. Why does the Balanced Scorecard differ from company to company? Whose responsibility is the implementation?

     

     

     

     

     

    1. Lionheart Manufacturing has a theoretical capability to produce 20,250 printers per quarter but currently produces 10,125 printers. The conversion cost per quarter is $4,860,000. There are 6,750 production hours available within the plant per quarter. In addition to the processing minutes per unit used, the production of printers uses 12 minutes of move time, 8 minutes of wait time, and 10 minutes of rework time. (All work is done by cell workers.)Required:a.      Compute the theoretical and actual velocities per hour and the theoretical and actual cycle times (minutes per unit produced).
      b.      Compute the ideal and actual amounts of conversion cost assigned to each printer.
      c.      Calculate the current MCE.
      d.      If poor employee training is the root cause of wait time and move time, develop an improvement strategy as a series of if-then statements that will reduce the conversion cost per printer.

     

     

     

     

     

    1. Tavarek Industries has the theoretical capability to produce 127,500 units per month but currently produces 102,000 units. The conversion cost for the month is $3,750,000. There are 8,500 production hours available within the plant per month. In addition to processing time, to produce a unit takes 15 minutes of move time and 10 minutes of wait time.Required:
    1. Compute the theoretical and actual velocities per hour
    2. Compute the theoretical and actual cycle times (minutes per unit produced)
    3. Compute the current MCE

     

     

     

     

     

     

    1. Barney’s Town is a local clothing store in New York. Barney’s Town has been experiencing increased competition from the national clothing chains. In an effort to improve performance, management intends to create a Balanced Scorecard. In a meeting, several measures were suggested by various managers.Management has identified a key problem. Customers are taking too long to pay their department store’s charge card bills, and the company has an abnormal amount of bad debts. If this problem were solved, the company would have far more cash to invest in store improvements. Investigation has revealed that much of the problem with late payments and unpaid bills is apparently due to disputes about incorrect charges on the customer bills. Incorrect charges usually occur because sales clerks enter data incorrectly on the charge account slip.The performance measures suggested by the managers are given below:
    · Total sales revenue
    · Sales per square foot of floor space
    · Sales to inventory ratio
    · Sales per employee
    · Sales to total assets
    · Customer satisfaction with accuracy of charge account bills from monthly customer survey
    · Customer wait time for service
    · Travel expenses for buyers’ trips
    · Average age of accounts receivable
    · Courtesy shown by junior staff members based on surveys of senior staff
    · Unsold inventory at the end of the season as a percentage of total cost of sales
    · Percentage of suppliers making just-in-time deliveries
    · Quality of food in the staff cafeteria based on staff surveys
    · Written-off accounts receivable as a percentage of sales
    · Percentage of charge account bills containing errors
    · Percentage of employees who have attended the city’s cultural diversity workshop
    · Total profit
    · Profit per employee
    · Percentage of salesclerks trained to correctly enter data on charge account slips

    Required:

    a. Build an integrated Balanced Scorecard using only performance measures suggested by the managers. You do not have to use all the measures, but build a Balanced Scorecard that reveals a strategy for dealing with the problems with accounts receivable and unsold merchandise.
    b. Construct a testable strategy by showing the causal links (with arrows) between measures in the different perspectives, and show whether the performance measure should show an increase or decrease.
    c. Assume that the company adopts the Balanced Scorecard. After operating for a year, there are improvements in some performance measures but not in others. What should management do next?

     

     

     

     

     

     

    1. The Sand and Sun scuba resort recently changed owners. The new owners planned to upgrade the resort into to a destination vacation resort by improving the lodging and the restaurant. Currently, the restaurant has a limited menu of sandwiches and little competition because of its location. The current staff has been retained and the new management held a meeting with the employees to develop a balanced scorecard that would guide operations. All were enthusiastic about creating the scorecard and the new management’s plans for the resort.The following measures were developed for an initiative that would improve the restaurant:a.      Resort sales
      b      Resort return on investment
      c.      Number of menu items
      d.      Dining area cleanliness
      e.      Customer satisfaction with menu choices through satisfaction surveys
      f.      Customer satisfaction with service through satisfaction surveys
      g.      Average time to take an order
      h.      Average time to prepare an order
      i      Percentage of the cooking staff completing a basic cooking course at the
      community college
      j.      Percentage of restaurant staff completing a hospitality course at the
      community college
      Required:

      1.      For each measure, create a balanced scorecard (show the perspective, measure and      measure) indicate whether the performance measure should increase ( +) or
      decrease (-).
      2.      Create a strategy map that links the performance measures.
      3.      What are the hypotheses built into the scorecard? Through if/then statements show how performance will be improved.
      4.      How will management know if one of the hypotheses is false?

     

     

     

     

     

    1. How can management communicate strategy? What are three methods for achieving strategic alignment? What management failure can keep strategy from being actionable?

     

    Chapter 15–Lean Accounting and Productivity Measurement

    Student: ___________________________________________________________________________

    1. Lean manufacturing is concerned with eliminating waste in manufacturing processes.
      True    False

     

    1. Lean manufacturing adds value by reducing labor costs.
      True    False

     

    1. Customer value is the difference between what a customer receives and what they give up.
      True    False

     

    1. The value stream focuses on just value-added activities.
      True    False

     

    1. Employee empowerment is a major difference between traditional and lean environments.
      True    False

     

    1. Changes in product-costing and operational control approaches are crucial to a value-stream based lean manufacturing system.
      True    False

     

    1. Productivity is concerned with the efficiency of input usage in producing output.
      True    False

     

    1. The two lean accounting approaches are average-costing and value-stream cost reporting.
      True    False

     

    1. Implementing the value-stream structure requires an increase in employees.
      True    False

     

    1. Value-stream costing reports the actual revenues and actual costs on a weekly basis for each value stream.
      True    False

     

    1. A Box Scorecard is used by the lean control system to compare operational, capacity, and financial figures
      True    False

     

    1. Technical efficiency is concerned with a given input using no more than needed output.
      True    False

     

    1. Allocating efficiency chooses the least costly, technically efficient combination of inputs.
      True    False

     

    1. Productivity measurement is a quantitative assessment of increases or decreases in productivity.
      True    False

     

    1. Operational partial measures are difficult to interpret by those within an organization.
      True    False

     

    1. The productivity measure of all inputs simultaneously is called total productivity measurement.
      True    False

     

    1. Profile measurement provides a series of profiles for all operational measures.
      True    False

     

    1. Profit-linked productivity measurement involves the measuring of the amount of profit related to productivity change.
      True    False

     

    1. Partial measures allow managers to focus on the use of the total production and are easily interpreted.
      True    False

     

    1. The disadvantage of using partial measures in isolation is that it can be misleading.
      True    False

     

    1. The worth of one or more features of a product for which customers are willing to pay is called __________ .
      ________________________________________

     

    1. Identifying value streams may be accomplished by using a two-dimensional matrix where __________ are listed on one dimension, and __________ on a second dimension.
      ________________________________________

     

    1. The departments or cells that contain all the related operations needed to produce a family of products are called __________ .
      ________________________________________

     

    1. Maximizing customer value, on-demand production, and zero setup times are realized in the pursuit of __________ .
      ________________________________________

     

    1. The __________ is used by the lean control system to compare operational, capacity, and financial metrics.
      ________________________________________

     

    1. In a lean environment, many overhead costs are assigned to products as directly __________ costs.
      ________________________________________

     

    1. __________ allocation is the only allocation used regularly in a value stream cost assignment.
      ________________________________________

     

    1. The accounting approach designed to support and encourage lean manufacturing is called __________ accounting.
      ________________________________________

     

    1. The point at which technical and allocative efficiency are achieved is called __________ efficiency.
      ________________________________________

     

    1. The achievement of __________ efficiency and __________ efficiency is the point of total productive efficiency.
      ________________________________________

     

    1. The process of producing output efficiently using the least amount of inputs is
      called __________ .
      ________________________________________

     

    1. The quantitative assessment of productivity changes is called __________ measurement.
      ________________________________________

     

    1. The component which provides a server or vector of separate and distinct partial operational measures is called __________ measurement.
      ________________________________________

     

    1. An assessment of productive efficiency for all inputs combined is called __________ measurement.
      ________________________________________

     

    1. The difference between the total profit change and the profit-linked productivity change is
      called the __________ component.
      ________________________________________

     

    1. Lean manufacturing benefits of better quality, reduced lead times, inventory reductions, and reduced setup times result in
      A. lower manufacturing costs.
      B. increased production rates.
      C. reductions in innovative capabilities.
      D. both a and b.

     

    1. Lean manufacturing is best defined as
      A. an operating approach that reports on the effectiveness of the management of the organization.
      B. an operating approach designed to eliminate waste and maximize customer value.
      C. an operating approach that is designed to analyze the activities of the organization.
      D. an operating approach that is designed to compute variances between expectations and actual performance.

     

    1. Which of the following is NOT a characteristic of a lean manufacturing system?
      A. delivery of the right product in the right quantity
      B. zero defect
      C. delivery of product the exact time a customer needs it
      D. all of the above

     

    1. A difference between Toyota’s lean manufacturing system and Ford’s lean enterprise system is
      A. Toyota incorporated employee empowerment, team structure, cellular manufacturing, small batches, and reduced setup times as integral pieces of their system.
      B. Toyota was not structured to deal with product variety.
      C. Toyota valued process over employees.
      D. Low volume products were not compatible with either system.

     

    1. Which is NOT a benefit of lean manufacturing?
      A. increased productivity
      B. reduced lead times
      C. reduced direct labor costs
      D. reductions in inventory

     

    1. Lean manufacturing shares many of the same methodologies as
      A. activity-based management.
      B. JIT manufacturing.
      C. process costing.
      D. none of the above.

     

    1. Identification of a “value stream,” pursuit of perfection, and making value flow without interruption are examples of
      A. total quality management.
      B. activity-based costing.
      C. principles of lean thinking.
      D. Kanban processing.

     

    1. The worth of one or more features of a product for which the customer is willing to pay is defined as:
      A. Value
      B. Quality
      C. Efficiency
      D. Innovation

     

    1. To identify value streams using a two-dimensional matrix, the following two items must be utilized:
      A. value indicators; costs
      B. activities/processes; costs
      C. quality indicators; products
      D. activities/processes; products

     

    1. The value stream
      A. is made up of all activities, both value-added and non-value-added, required to bring a product group or service from its starting point to a finished product in the hands of the customer.
      B. is made up value-added activities required to bring a product group or service from its starting point to a finished product in the hands of the customer.
      C. is where the production stream is triggered by forecast.
      D. is a series of steps designed to set target costs.

     

    1. The order fulfillment value stream focuses on
      A. developing new products for new customers.
      B. providing current products to current customers.
      C. providing current products to new customers and new products to new customers.
      D. the production, sale, and delivery of products.

     

    1. The new product value stream focuses on
      A. developing new products for new customers.
      B. providing current products to current customers.
      C. providing current products to new customers and new products to new customers.
      D. the production, sale, and delivery of products.

     

    1. There are two basic types of non-value added activities. They are
      A. activities avoidable in the long run and activities unavoidable in the short run due to current technology or production methods.
      B. activities avoidable in the short run and activities unavoidable in the long run due to current technology or production methods.
      C. activities unavoidable in the short run due to current technology and activities avoidable due to production methods.
      D. activities avoidable in the short run and activities unavoidable in the short run due to current technology or production methods.

     

    1. The processing department can produce one unit every 5 minutes and is the last department before the finishing department. Under traditional manufacturing where a batch equals 10 units, how long will it be before the first unit in the batch can move from the processing department to the finishing department?
      A. 5 minutes
      B. 50 minutes
      C. 10 minutes
      D. not enough information is given

     

    1. In a traditional manufacturing setup
      A. there is significant move and wait time.
      B. organization is by function into departments.
      C. products are produced in large batches.
      D. all of the above.

     

    1. Reducing the time it takes to configure equipment to produce a different product is an example of
      A. cellular manufacturing.
      B. batch processing.
      C. reduced setup/changeover times.
      D. value flow stream.

     

    1. The departments or cells which contain all the operations in close proximity that are needed to produce a family of products.
      A. Manufacturing cells
      B. Value stream cells
      C. Batch departments
      D. Plant departments

     

    1. Figure 15-1The following information relates to Lancashire Manufacturing:To produce a unit of product:
    Mixing department 3 minutes per unit
    Molding department 5 minutes per unit
    Casting department 7 minutes per unit
    Finishing department 4 minutes per unit

    There is a wait time of 8 minutes before the mixing department begins a batch, 5 minutes between the mixing and molding departments, a move and pre-wait between molding and casting of 10 minutes, and a move and pre-wait between the casting and finishing departments of 12 minutes.

    Refer to Figure 15-1. How long does it take to produce a batch of 20 units under a traditional manufacturing approach?
    A. 380 minutes
    B. 415 minutes
    C. 35 minutes
    D. none of the above

     

    1. Figure 15-1The following information relates to Lancashire Manufacturing:To produce a unit of product:
    Mixing department 3 minutes per unit
    Molding department 5 minutes per unit
    Casting department 7 minutes per unit
    Finishing department 4 minutes per unit

    There is a wait time of 8 minutes before the mixing department begins a batch, 5 minutes between the mixing and molding departments, a move and pre-wait between molding and casting of 10 minutes, and a move and pre-wait between the casting and finishing departments of 12 minutes.

    Refer to Figure 15-1. Which area represents the bottleneck operation?
    A. finishing
    B. casting
    C. molding
    D. mixing

     

    1. Figure 15-1The following information relates to Lancashire Manufacturing:To produce a unit of product:
    Mixing department 3 minutes per unit
    Molding department 5 minutes per unit
    Casting department 7 minutes per unit
    Finishing department 4 minutes per unit

    There is a wait time of 8 minutes before the mixing department begins a batch, 5 minutes between the mixing and molding departments, a move and pre-wait between molding and casting of 10 minutes, and a move and pre-wait between the casting and finishing departments of 12 minutes.

    Refer to Figure 15-1. What is the production rate?
    A. 8.6 units per hour
    B. 7 units per hour
    C. 21 units per hour
    D. 19 units per hour

     

    1. Figure 15-1The following information relates to Lancashire Manufacturing:To produce a unit of product:
    Mixing department 3 minutes per unit
    Molding department 5 minutes per unit
    Casting department 7 minutes per unit
    Finishing department 4 minutes per unit

    There is a wait time of 8 minutes before the mixing department begins a batch, 5 minutes between the mixing and molding departments, a move and pre-wait between molding and casting of 10 minutes, and a move and pre-wait between the casting and finishing departments of 12 minutes.

    Refer to Figure 15-1. How long would it take to process the first unit of a 20-unit batch under a cellular manufacturing setup?
    A. 21 minutes
    B. 12 minutes
    C. 19 minutes
    D. 60 minutes

     

    1. The production rate
      A. tells how many units of a product can be produced by the manufacturing cell.
      B. calculates how many minutes it takes an operation to process one unit of product.
      C. calculates the processing time of the slowest department.
      D. calculates the wait and move time of a production.

     

    1. In a demand-pull system
      A. production is triggered by a forecast.
      B. production is triggered by a customer order.
      C. production is triggered by a vendor shipment.
      D. production is triggered by an economic reorder point.

     

    1. Figure 15-2The following information relates to Cranmore Manufacturing:To produce a unit of product:
    Cutting department 5 minutes per unit
    Welding department 8 minutes per unit
    Polishing department 3 minutes per unit
    Finishing department 4 minutes per unit

    There is a wait time of 5 minutes before the cutting department begins a batch, 15 minutes between the cutting and welding departments, a move and pre-wait between welding and polishing of 12 minutes, and a move and pre-wait between the polishing and finishing departments of 8 minutes.

    Refer to Figure 15-2. What is the cycle time of operation?
    A. 60 minutes
    B. 20 minutes
    C. 35 minutes
    D. 16 minutes

     

    1. Figure 15-2The following information relates to Cranmore Manufacturing:To produce a unit of product:
    Cutting department 5 minutes per unit
    Welding department 8 minutes per unit
    Polishing department 3 minutes per unit
    Finishing department 4 minutes per unit

    There is a wait time of 5 minutes before the cutting department begins a batch, 15 minutes between the cutting and welding departments, a move and pre-wait between welding and polishing of 12 minutes, and a move and pre-wait between the polishing and finishing departments of 8 minutes.

    Refer to Figure 15-2. If Cranmore produces in batches of 10 units, how much time would have elapsed by the time the 10th unit is produced under a manufacturing cell environment (assuming the cell is processing continuously)?
    A. 60 minutes
    B. 65 minutes
    C. 150 minutes
    D. some other amount

     

    1. Figure 15-2The following information relates to Cranmore Manufacturing:To produce a unit of product:
    Cutting department 5 minutes per unit
    Welding department 8 minutes per unit
    Polishing department 3 minutes per unit
    Finishing department 4 minutes per unit

    There is a wait time of 5 minutes before the cutting department begins a batch, 15 minutes between the cutting and welding departments, a move and pre-wait between welding and polishing of 12 minutes, and a move and pre-wait between the polishing and finishing departments of 8 minutes.

    Refer to Figure 16-2. What is the production rate?
    A. 12 units per hour
    B. 20 units per hour
    C. 15 units per hour
    D. 7.5 units per hour

     

    1. The JIT solution
      A. requires carrying materials inventory in order to lower the cost of inventory without production delays.
      B. requires selection of vendors based on lowest cost alone.
      C. exploits supplier linkages by negotiating long-term contracts with a few chosen suppliers located closest to the production facility and establishing more supplier involvement.
      D. requires a solid forecast to push production.

     

    1. Which of the following is NOT considered a major source of waste?
      A. costs spent on defect detection
      B. unnecessary movement of goods
      C. unnecessary transport of goods
      D. design of goods and services that don’t meet the needs of the customer

     

    1. The pursuit of perfection is realized in
      A. zero setup times.
      B. producing on demand.
      C. maximizing customer value.
      D. all of the above.

     

    1. Which of the following is NOT considered a major source of waste?
      A. waiting
      B. joint products
      C. overproduction of goods not needed
      D. defective products

     

    1. Which of the following is true in regards to a lean accounting system?
      A. The cost of people with specialized skills, such as industrial engineers, are allocated to all manufacturing cells based on an activity driver.
      B. Workers are multiskilled and responsible for setting up equipment, maintaining equipment, and operating equipment.
      C. Implementing a value stream system will require more workers.
      D. Workers are highly skilled in one specialized area or activity and are not expected to spend time on other value-added activities.

     

    1. Which of the following is a reason traditional costing approaches may NOT work in a lean manufacturing environment?
      A. Standard costing variances encourage overproduction.
      B. Distorted product costs may conceal the outcome of success of a lean system.
      C. Traditional operational controls work against demand-pull systems.
      D. all of the above.

     

    1. Emphasis on departmental efficiency
      A. causes bottleneck departments to over-produce and build work-in-process inventories.
      B. causes stock outs related to demand-pull systems.
      C. is a critical component of a lean accounting system.
      D. none of the above.

     

    1. In a lean environment, many overhead costs are assigned to
      A. products using driver tracing.
      B. products as directly traceable costs.
      C. products using allocation methods.
      D. costs using plantwide overhead rates.

     

    1. Why might labor costs be reduced in a value stream system?
      A. The elimination of the need for any specialized skilled employees such as industrial engineers or production schedulers.
      B. The labor costs of industrial engineers and production schedulers can be pooled and allocated to the value streams.
      C. Some of the workers can be cross-trained to perform value-added activities within the value stream.
      D. none of the above.

     

    1. The only allocation used regularly in a value stream cost assignment is
      A. facilities.
      B. depreciation.
      C. maintenance.
      D. setup costs.

     

    1. With multiple products in a value stream, unit cost will increase if
      A. more units are shipped than produced.
      B. more units are produced than shipped.
      C. average conversion cost is used instead of total average cost.
      D. none of the above.

     

    1. If a facility has costs of $100,000 per year and 20,000 square feet, and if 19,000 square feet are absorbed by the value streams, what happens to the unabsorbed cost of the remaining 1,000 feet?
      A. allocated to all the value streams based on proportionate square foot usage
      B. assigned to all value streams equally
      C. absorbed by the largest value stream
      D. deducted from revenue as a separate item

     

    1. Which of the following is NOT a limitation of a value stream cost assignment?
      A. Initially, it may not be possible to allocate all the people needed in a value stream to that stream exclusively.
      B. There will always be some individuals whose related costs will remain outside of any particular value stream.
      C. A value stream is usually organized around a family of products.
      D. Having a value stream for each product is not practical.

     

    1. What is the usual formula for calculating product costs for value streams with multiple products?
      A. total value stream cost of period / units shipped for period
      B. budgeted value stream cost of period / units shipped for period
      C. total value stream cost of period / units sold for period
      D. budgeted value stream cost of period / forecasted units shipped for period

     

    1. In the calculation of product costs for value streams with multiple products, units shipped instead of units produced is used as the denominator because
      A. it reduces conversion costs assigned to the value stream.
      B. it motivates managers to reduce inventories.
      C. units shipped are always greater than units produced.
      D. units shipped is not used.

     

    1. In calculating product costs for a value stream with multiple products, average product costs are a good estimate of individual product costs if
      A. the products are similar and consume resources in approximately the same proportion.
      B. the product mix is relatively stable.
      C. the products are homogenous.
      D. all of the above.

     

    1. Figure 15 – 3Based on the following information:
    Materials Wages Machining Other Total cost
    Order Processing $ 28,000 28,000
    Purchasing 43,000 43,000
    Cutting $     160,000 36,000 $ 33,000 $   8,000 237,000
    Forming 57,500 49,000 22,000 12,000 140,500
    Finishing 42,500 28,000 5,000 75,500
    Testing 30,000 30,000
    Packaging and Shipping 10,000 10,000
    Invoicing                    6,000                              6,000
    Totals $260,000 $230,000 $60,000 $20,000 $570,000
    Part A 2,005 units
    Part Q 4,100 units
    Total 6,105 units

    Refer to Figure 15-3. What is the product cost based on total average cost? (Round to nearest cent.)
    A. $54.05
    B. $42.59
    C. $48.32
    D. $93.37

     

    1. Figure 15 – 3Based on the following information:
    Materials Wages Machining Other Total cost
    Order Processing $ 28,000 28,000
    Purchasing 43,000 43,000
    Cutting $     160,000 36,000 $ 33,000 $   8,000 237,000
    Forming 57,500 49,000 22,000 12,000 140,500
    Finishing 42,500 28,000 5,000 75,500
    Testing 30,000 30,000
    Packaging and Shipping 10,000 10,000
    Invoicing                    6,000                              6,000
    Totals $260,000 $230,000 $60,000 $20,000 $570,000
    Part A 2,005 units
    Part Q 4,100 units
    Total 6,105 units

    Refer to Figure 15-3. What is the product cost based on total average conversion cost? (Round to nearest cent.)
    A. $100.56
    B. $48.32
    C. $36.04
    D. $50.78

     

    1. The document used by the lean control system  that compares operational, capacity, and financial metrics with prior week performances and with a future desired state is called:
      A. balanced scorecard
      B. profit analysis worksheet
      C. box scorecard
      D. performance improvement plan

     

    1. In value-stream reporting, the income statement reflects the profit/loss by
      A. individual product line.
      B. activity.
      C. value stream.
      D. customer.

     

    1. Using average product cost for a value stream means that individual product costs are not known. This is adequate mainly because
      A. waste can be eliminated at the activity and process level without knowing product costs.
      B. a fully accurate product cost is not needed for many decisions.
      C. standard costing variances may actually impede improvement decisions.
      D. all of the above.

     

    1. Which of the following statements is true about the box scorecard?
      A. Operational, non-financial measures are used at the cell level.
      B. There is a comparison between prior week metrics, current week metrics, and desired future state metrics.
      C. The expectation to achieve desired future state provides motivation towards constant performance improvement.
      D. all of the above.

     

    1. On a box scorecard, capacity can be labeled as
      A. productive, non-productive, and excess.
      B. available, excess, and budgeted.
      C. productive, non-productive, and available.
      D. valued, excess, and wasted.

     

    1. Which of the following statements is NOT true about the box scorecard?
      A. Operational, non-financial measures are only used at the department level.
      B. There is a comparison of operational, capacity, and financial metrics.
      C. The lean control approach uses a mixture of financial and non-financial measures for the value stream.
      D. A weekly product cost is reported in the box scorecard.

     

    1. Which of the following is an example of an operational performance measure on a box scorecard?
      A. dock-to-dock days
      B. on-time delivery
      C. first time through
      D. all of the above

     

    1. The features and characteristics approach
      A. focuses only on total quality, zero-defects.
      B. recognizes the cost of a product is determined by the rate of flow of the product through the value stream.
      C. recognizes the cost of a product is determined by the amount of labor time required to make the product.
      D. recognizes the cost of a product is determined by the amount of machine hours required to make the product.

     

    1. What approach is normally used to calculate product costs when products in a value stream are heterogeneous?
      A. variable costing
      B. features and characteristics costing
      C. absorption costing
      D. functional costing

     

    1. Under features and characteristics costing, conversion costs are normally assigned
      A. using a predetermined overhead rate.
      B. using a labor rate.
      C. based on proportion of production.
      D. using a conversion ratio that considers different features.

     

    1. Figure 15-4
    Product A 5 minutes 8 minutes 3 minutes 4 minutes
    Product B 2 minutes 10 minutes 3 minutes 2 minutes

    Refer to Figure 15-4. Under traditional costing methods, which product would have more overhead costs allocated?
    A. Product A because the first two cycles are bottlenecks
    B. Product B because it has the highest individual cycle time in molding
    C. Product A because it has the highest total cycle time
    D. Unable to determine from information given

     

    1. Figure 15-4
    Product A 5 minutes 8 minutes 3 minutes 4 minutes
    Product B 2 minutes 10 minutes 3 minutes 2 minutes

    Refer to Figure 15-4. Under the features and characteristics costing method, which product would have more overhead costs allocated?
    A. Product A because it has the highest total cycle time
    B. Product B because it has the highest individual cycle time in molding, the bottleneck department
    C. Product A because the first two cycles are bottlenecks
    D. Unable to determine from information given

     

    1. Figure 15-4
    Product A 5 minutes 8 minutes 3 minutes 4 minutes
    Product B 2 minutes 10 minutes 3 minutes 2 minutes

    Refer to Figure 15-4. If the materials costs for both products are $75 per unit produced, and conversion costs are $120 per hour, what is the unit cost of Product B under the features and approach costing method?
    A. $190 per unit
    B. $95 per unit
    C. $91 per unit
    D. $92 per unit

     

    1. Figure 15-4
    Product A 5 minutes 8 minutes 3 minutes 4 minutes
    Product B 2 minutes 10 minutes 3 minutes 2 minutes

    Refer to Figure 15-4. If the materials costs for both products are $75 per unit produced, and conversion costs are $120 per hour, what is the unit cost of Product A under the features and approach costing method?
    A. $87 per unit
    B. $182 per unit
    C. $91 per unit
    D. $81.75 per unit

     

    1. The point at which technical and allocative efficiency are achieved is called:
      A. Input trade-off efficiency
      B. Productivity
      C. Financial productivity efficiency
      D. Total productive efficiency

     

    1. Productivity is concerned with producing
      A. output rapidly.
      B. output efficiently.
      C. the maximum quantity of output possible.
      D. output effectively.

     

    1. The point at which for any mix of inputs that will produce a given output, no more of any one input is used than is absolutely necessary is called:
      A. Input trade-off efficiency
      B. Technical efficiency
      C. Total productive efficiency
      D. Productivity

     

    1. The two efficiencies included at the point of achieving total efficiency are:
      A. cost efficiency; profit efficiency
      B. maintenance efficiency; profit efficiency
      C. sales efficiency; profit efficiency
      D. technical efficiency; allocative efficiency

     

    1. The quantitative assessment of productivity changes is called:
      A. Productivity measurement
      B. Operational productivity measure
      C. Technical efficiency
      D. Financial productivity measure

     

    1. The process of producing output efficiently, using the least quantity of inputs possible is(are) called:
      A. Productivity measurement
      B. Partial productivity measures
      C. Profile measurement
      D. Productivity

     

    1. The ratio that measures productive efficiency for one input is called:
      A. Partial productivity measurement
      B. Operational productivity measure
      C. Financial productivity measure
      D. Productivity measurement

     

    1. The productivity ratio used as a partial operational productivity measure is calculated as follows
      A. Output/Input.
      B. Input/Output.
      C. Input/Costs.
      D. Input/Sales.

     

    1. The measure of input and output used by a financial productivity measure is called:
      A. revenues
      B. dollars
      C. costs
      D. physical quantities

     

    1. The measure of input and output used by an operational productivity measure is called:
      A. revenues
      B. costs
      C. physical quantities
      D. dollars

     

    1. The productivity measure(s) in which inputs and outputs are expressed in dollars is(are) called:
      A. Productivity measurement
      B. Operational productivity measures
      C. Partial productivity measurement
      D. Financial productivity measures

     

    1. The productivity measure(s) that are expressed in physical terms is(are) called:
      A. Financial productivity measures
      B. Partial productivity measurement
      C. Operational productivity measures
      D. Productivity measurement

     

    1. The prior period used to set the benchmark for measuring productivity changes is(are) called:
      A. Financial productivity measures
      B. Base period
      C. Operational productivity measures
      D. Target period

     

    1. Which of the following is an advantage of using partial productivity measures?
      A. Partial productivity measures keep managers aware of trade-offs in inputs.
      B. Partial productivity measures keep top management involved because it is difficult for operating personnel to understand.
      C. Partial productivity measures are easily interpreted.
      D. Partial productivity measures provide a system wide focus.

     

    1. Which of the following is NOT a disadvantage of partial productivity measures?
      A. partial measures used in isolation
      B. the ability to focus on a particular input
      C. trade-offs effects among input productivity may be missed
      D. a decline in the productivity of an input may lead to an overall cost decline

     

    1. Information about Papanicolou Corporation is as follows:
    2014 2015
    Output (units) 45,000 47,000
    Selling price per unit $25 $25
    Input quantities:
        Materials (pounds) 2,500 2,500
        Labor (hours) 1,500 1,525
    Input prices:
        Materials (per pound) $5.00 $5.50
        Labor (per hour) $7.00 $7.50

    What is the materials productivity ratio for 2014?
    A. 28
    B. 18
    C. 25
    D. 16

     

    1. Information about Papanicolou Corporation is as follows:
    2014 2015
    Output (units) 45,000 47,000
    Selling price per unit $25 $25
    Input quantities:
        Materials (pounds) 2,500 2,500
        Labor (hours) 1,500 1,525
    Input prices:
        Materials (per pound) $5.00 $5.50
        Labor (per hour) $7.00 $7.50

    What is the labor productivity ratio for 2014?
    A. 22.84
    B. 24.80
    C. 24.00
    D. 30.00

     

    1. Allocative efficiency can be defined as
      A. all non-value activities performed with minimal quantities needed to produce the given outputs.
      B. elimination of all non-value-added activities.
      C. input prices determining the relative proportions of each input that should be used.
      D. input prices determining the relative proportions of each output that should be produced.