Cost Accounting A Managerial Emphasis, Canadian Edition

Question 1 To execute the company strategy, measures on the balanced scorecard would most likely include the A) number of process improvements. B) price premium earned. C) market share. D) the amount invested in new product features. E) employee satisfaction. Answer: Question 2 A department could be considered a cost object. T/F? Answer: Question 3 Top management faces a persistent challenge to make sure that the performance evaluation model of lower level managers is A) focused on short-term performance. B) based solely on quantitative factors. C) not consistent with the decision model. D) consistent with the decision model. E) based only on future costs. Answer: Question 4 What are the physical volume proportions to allocate joint costs for Mr. DirtOut and Mr. SinkClean, respectively? A) 59.00% and 41.00% B) 60.82% and 39.18% C) 39.18% and 60.82% D) 59.79% and 40.21% E) 41.00% and 59.00% Answer: Question 5 What is the total manufacturing cost of Job 787 using normal costing? A) $17,100 B) $14,960 C) $12,800 D) $15,500 E) $14,300 Answer: Question 6 Performance measures must be based on financial information to be verifiable. T/F? Answer: Question 7 The standard error of the estimated coefficient indicates whether a relationship exists between the predictor variable and the outcome variable that cannot be attributed to chance alone. T/F? Answer: Question 8 Framingham Ltd. produces three products out of a common process. The company currently uses the physical measures method to allocate joint costs to the three product lines: Leonid (L), Madagascar, (M) and Napoleon (N). The manager of the Napoleon product line is particularly disgruntled. He believes that his product line is allocated a disproportionate share of joint costs. In a recent managers' meeting, he argued that the company should Page 1 of 585 Cost Accounting A Managerial Emphasis, Canadian Edition BIOLOGY-FORUMS.COM Cost Accounting: A Managerial Emphasis, Canadian Edition - 3725 Total Questions - Biology-F consider using sales value as splitoff as the joint cost allocation method. He stated that his product is sold in a highly competitive market and increasing price is not an option. The manager of the Leonid product line disagreed strongly. He stated that all products are sold in a competitive market place and that allocating joint costs on physical measures was simple and easily verifiable. The manager of the Madagascar product line sat quietly through the meeting and she did not seem to favour one method over the other. As the assistant controller, you were asked by the controller to look into the concerns of the product line managers. The following additional information is available: Product Line Physical Volume Unit Selling Price Leonid 10,000 units $79.20 Madagascar 12,000 units $36.00 Napoleon 18,000 units $20.00 Joint costs for the company are $950,000. Required: As the assistant controller, prepare a report to the controller. Answer: Question 9 In the weighted-average method, costs of units completed and transferred out, and in ending work-in-process, are calculated using average total costs obtained after merging costs of beginning work-in-process and costs added in the current period. T/F? Answer: Question 10 Sarasota Bicycles has been manufacturing its own wheels for its bikes. The company is currently operating at 100% capacity, and variable manufacturing overhead is charged to production at the rate of 30% of direct labour cost. The direct materials and direct labour cost per unit to make the wheels are $3.00 and $3.60 respectively. Normal production is 200,000 wheels per year. A supplier offers to make the wheels at a price of $8 each. If the bicycle company accepts this offer, all variable manufacturing costs will be eliminated, but the $84,000 of fixed manufacturing overhead currently being charged to the wheels will have to be absorbed by other products. Required: a. Prepare an incremental analysis for the decision to make or buy the wheels. b. Should Sarasota Bicycles buy the wheels from the outside supplier? Justify your answer. Answer: Question 11 The sales value at splitoff method can be used to value inventory as well as determining cost of goods sold. T/F? Answer: Question 12 Measures which monitor critical performance variables that help managers track progress toward achieving a company's strategic goals are collectively called diagnostic control systems. T/F? Answer: Question 13 Which of the following statements about a high correlation between two variables s and t is FALSE? A) s may cause t. B) t may cause s. C) They both may be affected by a third variable. D) The correlation establishes an economically plausible relationship between costs and their cost drivers. E) The correlation may be due to random chance. Answer: Question 14 Generally, costs which are initially recorded as an asset and subsequently become an expense are called A) inventoriable costs. B) non-manufacturing costs. C) manufacturing costs. Page 2 of 585 BIOLOGY-FORUMS.COM Cost Accounting: A Managerial Emphasis, Canadian Edition - 3725 Total Questions - Biology-F D) non-capitalized costs. E) non-inventoriable costs. Answer: Question 15 What are the variable costs per unit associated with Product ICT101? A) $18 B) $22 C) $88 D) $92 E) $28 Answer: Question 16 Businesses may opt not to claim the full amount of available capital cost allowance. T/F? Answer: Question 17 The feedback obtained in the decision process cannot affect A) future predictions. B) the prediction method. C) the decision model. D) implementation. E) past performance. Answer: Question 18 Throughput costing provides more incentive to produce inventory than does absorption costing. T/F? Answer: Question 19 Ames Power Point had sales in October of $28,000,000 for its three stores in Toronto. The beginning merchandise inventories for October and November were $5,000,000 and $4,000,000, respectively. October purchases totalled $19,000,000. All sales are on account (terms 2/15, net 30 days) and are collected 50 percent in the month of the sale and 50 percent in the following month. One-half of all sales discounts are taken for a total of $265,000. September sales totalled $25,000,000 while November sales were $30,000,000. Additional information for October is as follows: Supplies used $1,000,000 Salaries and benefits 1,500,000 Maintenance 45,000 Amortization 9,000 Utilities 35,000 Principal payment on maturing bonds 2,000,000 Required: Using an appropriately formatted income statement, determine the operating income of the company. Answer: Question 20 Receiving cash from a customer on account would include a: A) debit to Accounts Receivable and a credit to Cash B) debit to Cash and a credit to Accounts Payable C) debit to Accounts Payable and a credit to Cash D) debit to Cash and a credit to Accounts Receivable Answer: Question 21 Net realizable value generally means expected sales value plus expected separable costs. Page 3 of 585 BIOLOGY-FORUMS.COM Cost Accounting: A Managerial Emphasis, Canadian Edition - 3725 Total Questions - Biology-F T/F? Answer: Question 22 Theoretical capacity is rarely used to calculate the budgeted fixed manufacturing cost per case because it departs significantly from the real capacity available to a company. T/F? Answer: Question 23 The most important task in variance analysis is to understand why variances occur, and then to use that knowledge to promote learning and continual improvement. T/F? Answer: Question 24 Product-cost cross-subsidization means that if a company undercosts one of its products, it will gain market share due to a more competitive price. T/F? Answer: Question 25 The process in which a company's products or services are measured relative to the best possible levels of performance is known as A) benchmarking. B) measuring the performance gap. C) standard measurement. D) variance measurement. E) budgeting. Answer: Question 26 Hitz Video Rental is evaluating rental prices. Historical data show that Friday and Saturday have twice the rentals of other days of the week. The following information pertains to the store's normal operations per week: Average rentals per day on Friday and Saturday 1,150 Average rentals per day on Sunday through Thursday 500 Store hours per day 12 Total units available for rent 10,000 Variable operating costs per hour $ 40 Marketing costs per week $1,500 Customer service costs per week $ 250 Required: What is the unit cost when establishing a long-run price for rentals? Answer: Question 27 Using the incremental method, what amount of revenue will be allocated to Math Fun in the package that contains all three products? A) $48.25 B) $60.00 C) $45.60 D) $50.67 E) $90.00 Answer: Question 28 If the stand-alone method were used, what amount of cost would be allocated to the start-up business? A) $40,000 B) $50,000 C) $10,000 Page 4 of 585 BIOLOGY-FORUMS.COM Cost Accounting: A Managerial Emphasis, Canadian Edition - 3725 Total Questions - Biology-F D) $42,000 Answer: Question 29 Ratzlaff Company has a current production level of 20,000 units per month. Unit costs at this level are: Direct materials $0.25 Direct labour 0.40 Variable overhead 0.15 Fixed overhead 0.20 Marketing - fixed 0.20 Marketing/distribution - variable 0.40 Current monthly sales are 18,000 units. Jim Company has contacted Ratzlaff Company about purchasing 1,500 units at $2.00 each. Current sales would NOT be affected by the one-time-only special order, and variable marketing/distribution costs would NOT be incurred on the special order. What is Ratzlaff Company's change in operating profits if the special order is accepted? A) $400 increase in operating profits B) $400 decrease in operating profits C) $1,800 increase in operating profits D) $1,800 decrease in operating profits E) $1,500 increase in operating profits Answer: Question 30 Fixed Manufacturing Overhead Variances that are not material should only be written off to Cost of Goods Sold. T/F? Answer: Question 31 Calculate the rate variance for fixed setup overhead costs. A) $1,600 unfavourable B) $400 unfavourable C) $600 unfavourable D) $400 favourable E) $600 favourable Answer: Question 32 Which of the following is an assumption of CVP analysis? A) Costs must be separated into separate fixed and variable components. B) Total revenues and total costs are curvilinear in relation to output units. C) Given revenue mixed of products is dynamic. D) There will be a change between beginning and ending levels of inventory. E) The time value of money must be taken into account. Answer: Question 33 Quantitative factors are always expressed in financial terms. T/F? Answer: Question 34 What is the net present value of the Neptune Ltd. investment? A) ($26,291) B) ($47,277) C) $225,536 D) ($60,613) E) $93,000 Answer: Page 5 of 585 BIOLOGY-FORUMS.COM Cost Accounting: A Managerial Emphasis, Canadian Edition - 3725 Total Questions - Biology-F Question 35 What are the expected final sales values of production if Product Z5 and Product W3 are produced? A) $11,250 and $34,375 B) $22,500 and $5,000 C) $31,250 and $10,500 D) $34,375 and $10,500 E) $34,375 and $11,250 Answer: Question 36 What is the effect of the following journal entry? Manufacturing Overhead Control (rework) 125 Materials Control 30 Wages Payable 80 Manufacturing Overhead Control Allocated 15 A) to allocate $125 of overhead as rework costs B) to expense $125 of overhead as rework costs C) to set up rework costs on the balance sheet D) to record $125 of overhead as rework costs E) to accumulate rework costs so they can be assigned to a specific job Answer: Question 37 Throughput contribution is equal to revenues minus direct material and direct labour costs. T/F? Answer: Question 38 One of the major aspects of accounting for scrap is inventory costing, which includes when and how scrap affects operating income. T/F? Answer: Question 39 When machine-hours are used as a cost allocation base, the item MOST likely to contribute to an unfavourable production-volume variance is A) a new competitor gaining market share. B) a new manufacturing machine costing considerably more than expected. C) an increase in the cost of energy. D) strengthened demand for the product. E) an increase in the number of direct-labour hours. Answer: Question 40 The coefficient of determination (r2) measures the percentage of variation in Y explained by X (the independent variable). T/F? Answer: Question 41 Southwestern Company needs 1,000 motors in its manufacture of automobiles. It can buy the motors from Jinx Motors for $1,250 each. Southwestern's plant can manufacture the motors for the following costs per unit: Direct materials $500 Direct manufacturing labour 250 Variable manufacturing overhead 200 Fixed manufacturing overhead 350 Total $1,300 If Southwestern buys the motors from Jinx, 30% of the fixed manufacturing overhead applied will be avoided. Required: Page 6 of 585 BIOLOGY-FORUMS.COM Cost Accounting: A Managerial Emphasis, Canadian Edition - 3725 Total Questions - Biology-F a. Should the company make or buy the motors? b. What additional qualitative factors should Southwestern consider in deciding whether or not to make or buy the motors? Answer: Question 42 Special orders increase income if the revenue from the order exceeds the incremental variable and fixed costs incurred to fill the order. T/F? Answer: Question 43 A trial balance is: A) prepared before the posting process is completed B) a list of income statement accounts with their balances C) a list of balance sheet accounts with their balances D) a list of all accounts with their balances Answer: Question 44 Costs of normal spoilage are usually accounted for as A) part of the cost of goods sold. B) part of the cost of goods manufactured. C) a separate line item in the income statement. D) an asset in the balance sheet. E) a liability in the balance sheet Answer: Question 45 Top management and general administration costs would MOST likely be classified as a A) customer output unit-level cost. B) customer batch-level cost. C) customer-sustaining cost. D) corporate-sustaining cost. E) distribution-channel cost. Answer: Question 46 How much will appraisal costs change assuming that the new prevention methods reduce material failures by 30% in the appraisal phase? A) $150,000 decrease B) $229,000 decrease C) $50,000 increase D) $50,000 decrease E) $84,000 decrease Answer: Question 47 A backflush costing system that journalizes only when raw materials are purchased and when finished goods are sold, will have which of the following results? A) It will encourage managers to produce safety stock. B) Conversion costs become period costs. C) Income is increased if managers produce more output than is sold. D) increased inventoriable costs E) Produce more safety stock, and conversion costs become period costs. Answer: Question 48 Which of the following results of net present value analyses is the LEAST acceptable?