Cost Accounting 1,2,3,16,17 & 8 chapter review

1) Responsibility accounting information
a. pertains to the company as a whole and is highly aggregated
b. pertains to subunits of the company and may be very detailed
c. is prepared only once a year
d. is constrained by requirements of GAAP

b. pertains to subunits of the company and may be very detailed

2) Which of the following is primary objective for management accountants when providing decisions support information?
a. Timeliness and relevance is more important than precision
b. I would rather be precisely right than potential wrong
c. I must have a

a. Timeliness and relevance is more important than precision

3) What are the information objectives for the responsibility accounting systems for managers?

Provide information for decision support and controls (performance evaluations)

4) Which is not conversion cost for an automobile?
a. steel in auto body panels
b. Assembly workers wages
c. depreciation on factory machinery
d. supervisor of a production dept.

a. steel in auto body panels

5) Which are period costs?
a. raw material
b. direct materials and direct labor
c. direct labor and manufacturing overhead
d. sales salaries

d. sales salaries

6) Cost is classified on external (GAAP) financial statements as
a. historical, replacement, and budgeted
b. product and period
c. variable, fixed, and mixed
d. prime cost and period cost

b. product and period

7) Davos Inc. makes fiberglass ski-boards. Which is correct?
a. Fiberglass is factory overhead
b. Factory property tax is a period cost
c. Marketing Dept. Office supplies OHD
d. Payroll taxes for workers in the Packaging Dept. is direct labor

d. Payroll taxes for workers in the Packaging Dept. is direct labor

8) For product costs to become expenses,
a. the product must be finished and in stock
b. the product must be expensed based on percent of completion
c. the product must be sold
d. all accounts payable must be settled

c. the product must be sold

9) What are the objectives for (GAAP) external reports prepared for investors?

Provide information to estimate the firms value (stock price)

10) Management accounting and financial accounting differ in the management accounting information is prepared
a. following prescribed rules
b. using methods the company finds beneficial
c. for stockholders
d. for the Internal Revenue Service

b. using methods the company finds beneficial

11) Which of the following statements represents a similarity between financial and managerial accounting?
a. both are solely concerned with historical transactions
b. both draw upon data from an organization's accounting systems
c. both are useful in pro

b. both draw upon data from an organization's accounting systems

12) The merchandise inventory in a merchandising business corresponds most closely to which of the following items in a manufacturing firm?
a. finish goods
b. cost of goods manufactured
c. raw material
d. cost of goods available for sale
e. work in proces

a. finish goods

13) A company has purchased some steel to use in the production of steel railing. If this steel has not been put into production, it would be classified as
a. finished goods inventory
b. work in process inventory
c. factory supplies
d. direct material inv

d. direct material inventory

14) The Murphy Corp. had the following information available for the year. What is the conversion cost?
DM purchased = $40,000
Overhead = $33,000
DL = 2,500 hours @ $8.00
Beg End
WIP $10k $15k
FGS $21k $17k
DMI $5k $8k
a. $89,000
b. $85,000
c. $57,000
d.

d. $53,000
conversion cost = DL + OHD
= (2,500 * $8.00) + $33,000
= $53,000

15) Assume the following data for Gross, Inc. What is the cost of goods manufactured?
Beg FGS $60,000
Beg WIP $40,000
End FGI $50,000
End WIP $80,000
Act OHD $ 200,000
Used DM $160,000
DL $100,000
a. $430,000
b. $420,000
c. $460,000
d. $470,000
e. $500,00

b. $420,000
Cost of Goods Manufactured
DM used $160,000
DL $100,000
OHD $200,000
Total Manufactured added (SUM) $460,000
Beg WIP $40,000
End WIP ($80,000)
Cost of Goods Manufactured (SUM) $420,000

16) Romeo Corporation reports the following for the year. The cost of goods manufactured of the year is
Beg FGI $3,200
End FGI $4,000
Total COGS $14,200
a. $11,000
b. $17,400
c. $15,000
d. $10,200
e. $21,400

c. $15,000
Total COGS
COGS Manu $???
Beg FGI $3,200
End FGI ($4,000)
Total COGS $14,200

17) The ending work in process inventory is deducted on the
a. statement of cost of goods manufactured
b. income statement
c. statement of financial position
d. balance sheet
e. statement of cash flow

a. statement of cost of goods manufactured

18) Asteroid Industries accumulated the following cost information for the year. Total factory overhead cost is
DM $16,000
Indirect M $4,000
Indirect L $8,500
Factory Dep $12,800
DL $37,000
a. $25,300
b. $78,300
c. $16,800
d. $12,800
e. $53,000

a. $25,300
OHD included all production costs other than DM and DL
Indirect M $4,000
Indirect L $8,500
Factory Dep $12,800
OHD (SUM) $25,300

19) During January, the cost of goods manufactured was $93,000. The beginning finished goods inventory was $16,000 and the ending finished goods inventory was $20,000. What was the cost of goods sold for the month?
a. $93,000
b. $129,000
c. $97,000
d. $89

d. $89,000
Total COGS
COGS Manu $93,000
Beg FGI $16,000
End FGI ($20,000)
Total COGS (SUM) $89,000

20) Begin and end inventory balances for the Rude, Inc. is shown below. Purchased of direct materials were $18,000. Direct labor and factory overhead costs were $20,000 and $28,000, respectively. The cost of goods manufactured was
Beg End
Raw material $9,

a. $71,600
COGS Manufactured
DM
Beg DM $9,000
Purchased $18,000
End DM ($7,000)
Total DM (SUM) $20,000
DL $20,000
OHD $28,000
Total Manufactured Cost add (SUM) $68,000
Beg WIP $16,000
End WIP ($12,400)
COGS Manufactured (SUM) $71,600

21) Scott is an accountant in a large company. Scott observed unethical behavior by a coworker who is also an accountant. The coworker is a relative of the company's president and he always received preferential treatment. Scott observed the coworker putt

b. He should report observations to his immediate supervisor

22) Publicly-traded companies preparing financial accounting reports must follow the accounting procedures established by the
a. SEC and FASB
b. IRS and FASB
c. SEC and IRS
d. None of these

a. SEC and FASB

A product cost is that is not directly-traced to the product is
a. conversion cost
b. recorded as a prime cost of production
c. allocated to selling and administrative costs
d. included as part of overhead
e. expensed as incurred

d. included as part of overhead

24) Accountants classify cost on external financial statements as
a. historical, replacement, and budgeted
b. variable, fixed, and mixed
c. product and period
d. relevant, sunk, and quality

c. product and period

Based on the following, what is pre-tax income for the month?
Sales $820,000
S&A $140,000
DM Purchase $176,000
DL $200,00
OHD $270,000
Beg End
DM $24,000 $28,000
WIP $50,000 $56,000
FGI $46,000 $38,000
a. $180,000
b. $36,000
c. $820,000
d. $90,000
e. $640

b. $36,000
COGS Manufactured
DM
Beg DM $24,000
Purchased $176,000
End DM ($28,000)
Total DM (SUM) $172,000
DL $200,000
OHD $270,000
Total Manufactured Cost add (SUM) $642,000
Beg WIP $50,000
End WIP ($56,000)
COGS Manufactured (SUM) $636,000
Total COGS
CO

Ceta Company had the following inventories at the beginning and end of January. Assuming the Cost of Goods Manufactured was $660,000, what was the cost of goods sold for January?
Beg End
FGI $125,000 $117,000
WIP $235,000 $251,000
DM $134,000 $124,000
a.

d. $668,000
COGS Total
COG Manufactured $660,000
Beg FGI $125,000
End FGI ($117,000)
COGS $668,000

27) The standards of ethical conduct for management accountants include
a. Competence and performance
b. integrity and respect for others
c. confidential, confidence, integrity and observance
d. competence, confidentiality, integrity, and credibility

d. competence, confidentiality, integrity, and credibility

28) Variable cost
a. Vary in total with changes in the cost driver
b. Do not change per unit of cost driver
c. None of the above
d. Both a & b

b. Do not change per unit of cost driver

29) Fixed costs
a. do not exist within a range of cost driver activity
b. FC per unit of cost driver varies inversely with the cost driver
c. usually includes direct material and direct labors costs
d. fixed per-unit of cost driver

b. FC per unit of cost driver varies inversely with the cost driver

30) If Y= a + bX is the cost relation, the "b" term represents
a. the total cost
b. the cost driver
c. the fixed portion of the cost
d. the rate of change in total cost

d. the rate of change in total cost
a = Y
b = X
c = a
d = b

31) Ace Airline has the following cost. Classify each cost as variable, fixed, or mixed. The cost driver is passengers/mile.
passenger/mile (000s)
10,000 20,000
Plane maintenance $60,000 $85,000
Supplies $30,000 $60,000
Depreciation $150,000 $150,000
Util

Plane maintenance = Mixed
Supplies = Variable
Depreciation = Fixed
Utilities = Variable

32) Cost driver activity and cost for October and November is below. What were mixed costs for November?
Cost Driver 5,000 10,000
VC $10,000
FC $30,000
MC $20,000
Total Cost $60,000 $75,000

MC = $25,000
Cost Driver 5,000 10,000
VC $10,000 (2x) $20,000
FC $30,000 $30,000
MC $20,000 $???
Total Cost $60,000 $75,000

33) Exec Funeral can provide up to 8 funeral a week with present resources. Cost information is below. What is the Exec's cost function?
Funerals TC
4 $72,400
5 $75,600
6 $78,800
7 $82,000
8 $85,200

TC = 3,200*funerals + 59,600
VC = (75,600-72,400)/(5-4) = 3,200
FC = TC - VC = 72,400 - (3,200*4) = 59,600

34) At 10,000 maintenance hour, variable cost totaled $35,000 and fixed cost totaled $20,800. If maintenance hours are 16,000, then
a. total cost is $89,280
b. cost per hour is $4.80
c. fixed cost per hour is $5.58
d. total cost is $55,800

b. cost per hour is $4.80
TC = VC1 + FC = 35,000 + 20,800 = 55,800
VC1 = X*B -> B = VC1/X = 35,000/10,000 = 3.5
TC = X2
B + FC = 3.5
16,000 + 20,800 = 76,800
Cost per hour = TC / hour = 76,800 / 16,000 = 4.80

35) Estimate variable cost for month 1
Month 1 2
Hours 2,000 2,500
Cost $900 $1,100
a. $800
b. $850
c. $825
d. $0

a. $800
VC per unit = (1,100-900) / (2,500 - 2,000) = 0.4
VC = .4 * 2,000 = $800

36) Cost is the Purchasing Debt is $9,000 for 8,000 orders and $11,250for 11,000 orders. Specify the cost function and estimates total cost for 9,200 orders.

Cost Function : Y = .75X + 3,000
Estimate at 9,200 = $9,900
TC = VC + FC
VC per hour = (11,250 - 9,000) / (11,000 - 8,000) = 0.75
FC = TC - VC = 9,000 - .75 * 8,000 = 3,000
TC = 9,200 * .75 + 3,000 = 9,900

37) Which of the following would be a total cost function that starts at the origin, reaches a max value and it parallel to the x-axis?
a. total direct material costs of $12.00 per unit, the cost driver is output
b. employees are paid $15.00 per hours and

d. a consultant paid $100.00 per hours with a maximum fee of $2,000, the cost driver is hours

38) The following is an estimate of overhead cost using regression. Select the correct statement.
Parameter Estimate t-stat p-stat
Intercept 10,000.41 4.81 0.0003
labor hours 14.05 6.78 0.0001
a. if an additional labor hour is worked, total OHD will incre

c. when 1,000 labor hours are worked, total OHD is more than $24,000
OHD = intercept estimate + labor estimate * hours
OHD = 10,000.41 +14.05 * labor
OHD = 10,000.41 + 14.05 * 1,000 = 24,050.41

39) Explain why average cost per unit of cost driver cannot be used to estimate cost at other cost driver levels.

Average cost includes VC that changes with the cost driver and FC does not change with the cost driver

40) A Purchasing Dept can process 20,000 purchases orders at a total fixed cost of $300,000. During the year, 16,000 orders were processed. What is the cost of excess capacity?

Excess Capacity = 60,000
Capacity per hour = 300,000/20,000 = 15
Excess Capacity = Resource Available-Resource Used
Resources Available = 300,000
Resources Used = (16,000 * 15) = 240,000
Excess Capacity = 300,000 - 240,000 = 60,000

41) If the cost driver increases 10.0%, total variable cost will
a. increase 10%
b. increase by more than 10%
c. decrease by less than 10%
d. remain the same

a. increase 10%

Which is true about using a scatterplot?
a. it is influenced by extreme observations
b. it useful to evaluate the validity of regression estimates
c. it is useful to distinguish between discretionary and committed fixed cost
d. it uses the least-squares m

b. it useful to evaluate the validity of regression estimates

43) The relevant range of activity refers to the
a. levels of activity over which cost relations are expect to be valid
b. geographical areas where the company plans to operate
c. activity level where all cost are curvilinear
d. level of activity where al

a. levels of activity over which cost relations are expect to be valid

Fixed cost per mile is $9.00 when 20,000 miles are driven and $6.00 when 30,000 miles are driven. What is the total cost when zero miles are driven?
a. $120,000
b. $270,000
c. $180,000
d. $0

c. $180,000
TC = VC + FC
TC = 0 + $9.00 * 20,000

French Company provided the following showing gas cost and monthly heating degree-days (cost driver). The cost function showing the relation between the gas cost (Y) and heating degree (X) is
X Y
February 1,800 $162
April 600 $78
a. Y = $48.00 + $0.07X
b.

c. Y = $36.00 + $0.07X
b = ($162-$78)/(1,800-600) = 0.07
$162 = a + .07 *1,800
a = $36

46) Baker Airlines developed a cost function for food cost of TC = $8,000 + $1.60*miles flown. The best estimate of food costs at 10,000 miles is
a. $16,000
b. none of these
c. $26,000
d. $17,600
e. $24,000

e. $24,000
TC = $8,000 + $1.6 * miles
TC = $8,000 + $1.6 * 10,000 = $24,000

47) Wallt Company has the following data for maintenance hours and total cost, respectively. Using high-low, estimate the amount of maintenance cost per hour.
Miles Cost
January 480 $4,200
February 320 $3,000
March 400 $3,600
April 300 $2,820
May 500 $4,3

a. $7.50
Low = April 300 $2,820
High = August 520 $4,470
Cost per hour = ($4,470-$2,820)/(520-300) = $7.50

48) The following data relate to the Hodges Company for May and August. Which of the responses is correct?
Maintenance hours 10,000 12,000
Maintenance cost $260,000 $300,000
a. variable maintenance cost is $26.00 per hour
b. variable maintenance cost is $

e. fixed maintenance cost is $60,000 per month
TC = VC + FC
VC per unit = ($300,000-$260,000)/(12,000-10,000) = $20.00 per hour
FC = TC - VC = $260,000 - $20.00 * 10,000 = $60,000

49) Cost and cost driver, respectively, is shown below. Estimate the cost function using high/low.
January $8,100 750
April $9,000 850
July $10,200 1,000
October $8,700 800
a. TC = $1,800 + $8.40* labor hours
b. TC = $2,400 + $8.40* labor hours
c. TC = $1

a. TC = $1,800 + $8.40* labor hours
TC = VC + FC
High = 1,000 $10,200
Low = 750 $8,100
VC per unit = ($10,200-$8,100)/(1,000-750) = $8.40
FC = TC - VC = $10,200
$8.40
1,000 = $1,800

50) A regression analysis between sales processing cost (Y) and sales resulted in the following least squares line: Y = 80,000 + 5.00*X. This implies that

increase of $1.00 in sales is expected to result in an increase of $5.00 in total cost

51) In a plot of mixed cost, the Y-intercept corresponds to the

fixed cost
Y = bX + a
a = FC
b = VC per unit

52) The cost function TC = 150 + 10.00*cost drive
a. has an intercept of 150
b. has a slope coefficient of 150
c. represent a fixed cost
d. is a nonlinear

a. has an intercept of 150

53) Cost A is fixed and cost B is variable with respect to the cost driver. If the cost driver has increased, the cost per unit of cost driver of
a. cost A remains unchanged
b. cost B has decreased
c. cost A has decreased
d. cost B has increased

c. cost A has decreased
Change in cost driver
Total VC changes the amount of CD
Unit FC changes inversely of CD

54) The high-low method may give unsatisfactory results if
a. volume of activity is heavy
b. volume of activity is light
c. there are less than 100 observations
d. the points are not reprehensive
e. the data points all fall on a line

d. the points are not reprehensive

55) The relevant range is
a. where all costs remain same
b. where fixed cost per unit of cost driver is expected to remain the same
c. where total VC remains the same
d. where total fixed cost are expected to remain the same

d. where total fixed cost are expected to remain the same

56) Donahue worked 120,000 labor hours at a total cost of $400,000, including $200,000 fixed cost. Next year Donahue expects to work 145,000 hours. What is the expected total cost for next year?

VC = TC - FC = $400,000 - $200,000 = $200,000
VC per unit = $200,000/120,000 = $1.67
TC = $1.67*145,000 + $200,000 = $441,667

57) Smart Company is relocating its facilities. The company estimates that it will take three trucks to move office contents. If the per truck rental charge is $1,000 plus $0.25 per mile, what is the expected cost to move 800 miles?
a. $1,200
b. $3,600
c.

b. $3,600
One truck = $1,000 + $0.25*800 = $1,200
3 trucks = $1,200 * 3 = $3,600

58) The following is from a computer printout showing the results for an analysis of overhead (OHD) cost using regression. The R-square statistic tells us that
parameter Estimate t-stat p-stat
intercept 10,000.41 4.81 0.0003
labor hours 14.05 6.78 0.0001

c. 80% of variation in OHD is explained by labor hours

59) A plot of data that results in bunched points with little apparent slope generally indicates
a. a strong relationship
b. a positive relationship
c. a weak relationship
d. a negative relationship

c. a weak relationship

60) In CVP analysis, 'cost' includes
a. only manufacturing cost
b. only cost of goods sold
c. all relevant cost (manufacturing cost plus selling & admin)
d. not fix manufacturing cost

c. all relevant cost (manufacturing cost plus selling & admin)

61) Which of the following would not be useful in CVP analysis?
a. output volume
b. fixed costs
c. product mix
d. gross margin

d. gross margin

62) VC is $27,000, FC is $18,000, loss is $4,500. What is break-even?
a. $37,500
b. $81,000
c. $49,500
d. $54,000
e. $36,000

d. $54,000
Income Statement after bottom work
Revenue $??? $40,500
VC $27,000 $27,000
CM (SUM) $??? $13,500
FC $18,000 $18,000
NI (SUM) ($4,500) (4,500)
Working from the bottom up
NI = CM - FC or CM = NI + FC = ($4,500) + $18,000 = $13,500
CM = Revenue -

63) Hardley Drive-In sells hamburgers. Fixed cost are $18,000 per month and variable cost are $2.00 per hamburger. Hardley estimates the following demand schedule. Which price should Hardley choose?
Price Unit Sale
$12.00 4,000
$10.00 5,500
$8.00 7,000

$10.00
Price CM/Unit CM
$12.00 $10.00 40,000
$10.00 $8.00 44,000
$8.00 $6.00 42,000
pick larger CM

64) Exec Funeral can provide up to 8 funerals a week with present resources. Normal weekly sales are between 4 and 8 funerals at $13,200 each. Cost information is below. What is weekly break even?
Funerals TC
4 $72,400
5 $75,600
6 $78,800
7 $82,000
8 $85,

VC per unit = $75,600 - $72,400 = $3,200
TC = VC + FC or FC = TC - VC
FC = $72,400 - ($3,200*4) = $59,600
Profit = CM - FC or 0 = ($13,200 - $3,200)*units - $59,600
break-even = 5.96 or 6 funeral

65) Which of the following would take place if a company experienced an increase in fixed cost?
a. the contribution margin would decrease
b. more than one of the response occurs
c. the break-even point would increase
d. the contribution margin would incre

c. the break-even point would increase
CM does not involve FC

66) The following results were recorded for Thomas Company. What is the contribution margin ratio?
Sales @ 10,000 units = $120,000
Variable Cost $72,000
Fixed Cost $36,000

CM ratio = CM/revenue
CM = Revenue - VC = $120,000 - $72,000 = $48,000
CM ratio - $48,000/$120,000 = 40%

67) Edco Company produced and sold 45,000 units of a product last year, with the following results. If Edco's sales revenues increase by 15.0%, what will be the increase in income?
Revenue $1,350,000
Manufacturing costs
Variable $585,000
Fixed $270,000
Se

d. 75%
Income Statement
Revenue $1,350,000 $1,552,500
VC ($810,000) ($931,500)
CM (Sum) $540,000 $621,000
FC ($432,000) ($432,000)
OI $108,000 $189,000
% Change = $189,000/$108,000

68) Lewis Production Company had the following projected information. Calculate revenue need to obtain a pre-tax profit of $75,000.
Selling price per unit $150.00
Variable cost per unit $90.00
Total fixed cost $300,00
a. $375,000
b. $750,000
c. $625,000
d

d. $937,500
Income Statement (work up from bottom)
Revenue $??
VC $??
CM (SUM) $375,000
FC $300,000
OI $75,000
CM = unit*(Selling price per unit - VC per unit)
$375,000 = ($150-$90)*unit
unit = 6,250
Revenue = 6,250 * $150 = $937,500

69) Oslo Corporation reported the following data. If the company's target profit was $480,000, it would have to sell
Units sold 8,000
Sales Revenue $7,200,000
Variable cost $4,000,000
Unit fixed cost $200.00
a. 5,200
b. 4,000
c. 2,800
d. 1,200

a. 5,200
FC = unit
FC per unit = 8,000
$200 = $1,600,000
VC per unit = VC / Unit = $4,000,000 / 8,000 = $500
Revenue per unit = $7,200,00 / 8,000 = $900
Income Statement
Revenue $???
VC $???
CM $2,080,000
FC $1,6000,000
OI $480,000
CM = (VC - Revenue per

70) Tropp Corp sells a product for $10.00 per unit. The fixed cost is $420,000 per month and the unit variable cost is 60.0% of the selling price. What are sales for income of 10.0% of sales?
a. $1,050,000
b. $840,000
c. $1,400,00
d. $945,000

c. $1,400,00
OI = 10 % of sales
VC = 60% of sales
FC = 30 % of sales
$420,000 = 30% * Revenue
Revenue = $1,400,000

71) A company has fixed costs of $320,000 and a contribution margin per unit of $15.00. If the company wants to earn $40,000 pretax income, how many units must be sold?
a. 24,000
b. 21,333
c. 20,000
d. 18,666
e. 2,667

a. 24,000
(Work up from the bottom)
Unit sold $??
CM per unit $15.00
CM $360,000
FC $320,000
OI $40,000
CM = CM per unit * unit
$360,000 / $15 = 24,000

72) Amfort company sells a product for $9.00 which has variable cost of $3.00 per unit. Last year, the company needed to sell 20,000 shirts to break even. The company is subject to a 40.0% tax rate. For income of $22,500 after tax for the coming year, wha

b. $236,250
OI after tax = Pre-tax * (1- % tax)
Pre-tax = $22,500/(1- 40%) = 37,500
CM ratio = CM / Revenue = ($9.00 - $3.00) / $9.00 = 2/3
Break-even revenue = $9.00 * 20,000 = $180,000
Break-even = FC / CM ratio
FC = $180,000 * 2/3 = $120,000
Income Sta

73) The Todd Dolhun Company has the following information available. How many units must be sold for after-tax income of $120,000?
Total FC $300,000
CM per unit $2.00
Tax Rate 40%
a. 180,000
b. 300,000
c. 250,000
d. 210,000

c. 250,000
After-tax = OI * (1- Tax Rate)
OI = $120,000 / 60% = $200,000
CM $2.00 per unit
FC ($300,000)
OI $200,000
units = 250,000

74) A 20.0% reduction in unit variable costs will
a. reduce the break-even sales by 20%
b. reduce the slope of the total cost line by 20%
c. Reduce total cost by 20%
d. No affect

b. reduce the slope of the total cost line by 20%
TC line is VC

75) When the Total Cost line is higher than the Total Revenue line, the difference represents
a. not enough
b. a loss
c. income
d. a positive return on the investment

b. a loss

76) Gladstone Co. has expected sales of $326,000 for the upcoming month and its monthly break even sales are $300,000. What is the margin of safety ratio?
a. 9.0%
b. 92.0%
c. 52.0%
d. 8.0%

d. 8.0%
Margin of safety ratio = (Sales - Break-even) / Sales
MS Ratio = ($326,000 - $300,000) / $326,000 = 7.79%

77) In evaluating whether to keep or dispose a product or division, a company should consider the division's
a. income before common cost
b. gross margin
c. contribution margin
d. none of the responses are correct

a. income before common cost

78) If a firm has made a correct decision to discontinue a division, which of the following should not decrease?
a. total corporate cost of good sold
b. to corporate sales
c. total corporate fixed cost
d. total corporate income

d. total corporate income

79) Which of the following statement is the most useful rule for management accountants when providing decision support information?
a. I would rather be precisely right than potentially wrong
b. I would rather have a reasonable estimate than ignore a rel

b. I would rather have a reasonable estimate than ignore a relevant cost

Which of the following statements is/are true?
I. A cost that is relevant in one decision may not be relevant in another decision.
II. A cost that can be avoided by choosing one alternative over another is relevant for decision purposes.
a. Both 1 and 2
b

a. Both 1 and 2

81) Which of the following costs is not relevant to a special-order decision?
a. direct labor costs to manufacture the special-order units
b. the variable manufacturing overhead incurred to manufacture the special-order units
c. the portion of the cost of

c. the portion of the cost of leasing the factoring that is allocated to the special order

82) Vytek Corp makes and sells a product for the following unit cost and plans output of 50,000 units. Selling price is $50.00 per unit. Capacity is 60,000 units. A wholesaler has contacted Vytek about purchasing 8,000 units. What selling price per unit m

a. $34.50 per unit
Variable Cost Only
DM $9.00
DL $8.00
VOHD $6.00
VS&A $4.00
Total $27.00
Profit per unit needed = $60,000/ 8,000 = $7.50
$27.00 + $7.50 = $34.50

83) CoolAir Corp manufactures portable window air conditioners. CoolAir has the capacity to manufacture and sell 80,000 air conditioners each year but is currently manufacturing and selling 60,000. The following per unit numbers relate to annual operation

a. $144,000
Income Statement (3,000 units)
Deal
Sales $225,000
Costs $81,000
OI $144,000

84) Wagner Company sells product A for $21.00 per unit. Wagner's unit product cost based on capacity of 200,000 units is below. A customer has offered to buy 20,000 units. The only selling costs that would be incurred on this order would be $3.00 per unit

a. $14.00
DM $4.00
DL $5.00
OHD $2.00 2/3 are so leave the 1.3 of variable cost
S&A $3.00
total $14.00

85) Which of the following minimizes the risks of outsourcing?
a. building a close partnership with supplier
b. the use of short-term contracts that specify price
c. shifting the firm's responsibility for on-time delivery to the supplier
d. increasing the

a. building a close partnership with supplier

86) A customer has requested that Lewelling Corp fill an order for 9,000 units of product S47 for $20.50 a unit. While the product would be modified slightly for the order, product S47's normal unit product cost is $14.40, as below. The customer would lik

a. $4,500
Income Statement
Sales $184,500
DM $27,900
DL $13,500
VOHD $57,600
Variable $27,000
Salvage $36,000
OI = 4,500

87) Jordan Company has the capacity to make 30,000 units a year of its only product. Cost and revenue data for last year is shown below. A foreign distributor has offered to buy 5,000 units at $90.00 per unit next year. Jordan plans sales next year of 18,

a. $175,000
Income Statement
No Deal Deal
Sales $500,000 $450,000
VC $275,000 $275,000
OI $225,000 $175,000

88) If a firm has made a correct decision to discontinue a division, which of the following should not decline?
a. total corporate sales
b. total corporate COGS
c. total corporate FC
d. Total corporate income

d. Total corporate income

89) Bonga Corp is considering dropping product D74F. Data from the company's accounting system for this product for last year appear below. Further investigation has revealed that $111,000 of the fixed manufacturing costs and $103,000 of the fixed selling

a. $-226,000
Sales $830,000
VC ($390,000)
FMC ($111,000)
FS&A ($103,000)
OI $226,000

90) Information below is for Cook Company's East Division. Eliminating East Division would have the following effect on company income.
Sales $550,000
VC $275,000
DFC $180,000
Allocate $170,000
a. decrease $550,000
b. increase $75,000
c. decrease $60,000

e. decrease $95,000
Income Statement
Sales $550,000
VC ($275,000)
DFC ($180,000)
OI $95,000

91) An opportunity cost is a
a. cost paid to take advantage of an opportunity, such as obtaining a franchise
b. fixed cost of implementing prevent measures to increase product quality
c. relevant, nonqualified cost that is estimated for the accounting rec

d. benefit foregone by choosing one alternative over another

92) Two months ago, Victory purchased 4,500 pounds of Hydrol, paying $15,300. The market for this product has been very strong since the acquisition, with the market price jumping to $4.05 per pound. The company recently received an order that would requi

a. The $4.05 market price

93) Occidental Comp is contemplating dropping a product because of ongoing losses. Costs that would be relevant in this situation would include variable manufacturing costs and
a. avoidable fixed cost
b. factory depreciation
c. unavoidable fixed cost
d. a

a. avoidable fixed cost

94) One of the departments in Parry Company has contribution margin of $50,000 per year and total fixed expenses of $65,000 per year, of which $25,000 are allocated. If the department is discontinued, the company's earnings would
a. decrease by $25,000
b.

c. decrease by $10,000
Income Statement
CM $50,000
FC ($65,000)
OI ($15,000)
Allocated Loss is discontinued is $25,000
($15,000) + 25,000 = $10,000

95) The flexible budget contains
a. budget amount for the plan cost driver
b. actual cost for the actual cost driver
c. actual cost for planned cost driver
d. budgeted amount for the actual cost driver

d. budgeted amount for the actual cost driver

96) The spending variance for fixed cost equals zero when
a. the actual level of cost driver is less than the plan cost driver
b. all of these
c. the actual level of cost driver equal the plan cost driver
c. the actual level of cost driver is greater than

b. all of these

97) When preparing a flexible budget, ________ costs are constant at different levels of cost driver activity.
a. variable
b. step
c. fixed
d. contributed

c. fixed

98) Mongelli Family Inn is a bed and breakfast in a converted 100-year-old mansion. The Inn's overhead plan for the most recent month appears below. The Inn's variable overhead cost driver is number of guests and 90 guests were planned. What would be the

c. $7,793.90
Variance per person
VC = $234 + $315 = $549
VC per = $549/90 = $6.10
N VC = $6.10 * 99 = $603.90
TC = VC + FC = $603.90 + $7,190 = $7,793.90

99) Domose Inc. planned to use $150.00 of material per unit but actually used $147.00 of material per unit, and planned to make 1,100 units but actually made 900 units. The flexible-budget amount for materials is
a. $161,700
b. $165,000
c. $132,300
d. $13

d. $135,000
Flexible Budget provides expect cost at a given level
expected cost = $150 per
FB = $150 * 900 = $135,000

100) Based on plan production of 12,000 units (cost driver), a company anticipates $150,000 of fixed costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable costs for 10,000 units are

FC = $150,000, VC = $102,500

101) A company's flexible budget for 12,000 units of production (cost driver) showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The contribution margin expected if the company produces and sells 16,000 units is:
a. $40,000
b. $64,0

a. $40,000
Sales per unit = $48,000/12,000 = $4.00
VC per unit = $18,000/12,000 = $1.50
CM= Sale - VC = ($4.00 - $1.50) * 16,000 = $40,000

102) At production and sales at a cost driver level of 12,000 units, plan income is $26,000 with VC of $72,000 and FC of $10,000. FC and VC for 15,000 units would be

FC = $10,000, VC = $90,000

103) Product A has a sales price of $10.00 per unit. Based on a 10,000-unit production level, VC are $6.00 per unit and FC of $3.00 per unit. At 12,500 units, income from Product A will be

OI = $20,000

104) Ofarrell Snow Removal's cost formula for its vehicle operating cost is $1,840 per month plus $377.00 per snow-day. For the month of November, the company planned for activity of 14 snow-days, but the actual level of activity was 19 snow-days. The act

FB = $9,003
FB is expect cost over actual levels of activity

105) Main Street Merchandising anticipated selling 24,000 units of a product and paying sales commissions of $5.00 per unit. Actual sales and sales commissions totaled 23,600 units and $120,360, respectively. The spending variance for sales commissions is

$2,360 U
Variance = (Expect cost - Actual)*Actual level of activity
Negative = Unfavorable
Positive = Favorable

106) Petrus Framing's plan cost formula for supplies $2,300 per month plus $6.00 per frame. For March, the company planned activity of 861 frames, the actual level of activity was 856 frames. The actual supplies cost for the month was $7,790. The spending

b. $30.00 F

107) Differences between actual cost and flexible budget cost at the actual level of cost driver activity is a ________ variance.
a. operating
b. static
c. activity
d. spending

d. spending

108) An unfavorable spending variance for variable costs may be the result of
a. using more cost driver than were budgeted
b. selling less quantity than budgeted
c. paying lower prices for inputs than were budgeted
d. selling at a higher price than budget

a. using more cost driver than were budgeted

109) The static budget is based on the ________ level of cost driver and the flexible budget is based on the ________ level of cost driver.

plan and actual

110) Buckson Framing's cost function for supplies cost is $1,350 per month plus $18.00 per frame. For June, the company planned for 716 frames, actual level of activity was 713 frames. The actual supplies cost for the month was $14,820. The supplies cost

FB = $14,184

111) Dynondo Incorporated planned to use materials of $12.00 per unit (cost driver) but actually used materials of $13.00 per unit, and planned to make 1,500 units but actually made 1,800 units. The spending variance for materials is

$1,800 U

107) Differences between actual cost and flexible budget cost at the actual level of cost driver activity is a ________ variance.

spending