WorksheetsInternational Accounting
Total questions: 137
Worksheet time: 11hrs 25mins
A company manufactures a speciality line of MTB-helmet using a job-order costing system. During March, the following costs wer incurred in completing Job A-1:
Direct materials: $ 13,700
Direct labor: $ 5,900
Administrative: $ 1,400
Selling: $ 5,600
Overhead was applied at the rate of $ 30 per machine hour, and job A-1 required 700 machine hours. If Job A-1 resulted in 7,000 good helmets, the cost of gods sold per unit would be:
$ 6,50
$ 6,30
$ 5,50
$ 5,80
The expected value of perfect information is:
Same as the expected profit under uncertainty
Sum of the conditional profit (loss) for the best event of each act times the probability of each event occuring
Difference between the expected profit under uncertainty and the expected opportunity loss
Difference between the expected profit under certainty and the expected monetary value of the best act under uncertainty
Which one of the following considers the impact of fixed factory overhead costs?
absorption costing
target costing
variable costing
throughput costing
Generally, in highly decentralised organisation the best option for measuring the performance of divisions (business units) is the establishment of
investment centers
profit centers
revenue centers
engineered expense centers
The use of activity based costing normally results in
substantially greater unit costs for low volume products than is reported by traditional product costing
substantially lower unit costs for low volume products than is reported by traditional product costing
equalizing set-up costs for all product lines
making pricing decisions more difficult
It is estimated that a particular manufacturing job is subject to an 60 percent learning curve. The first unit required 50 labor hours to complete. What is the cumulative average time per unit after eight units completed?
25,6 hours
18,0 hours
10,8 hours
6,5 hours
Costs that arise from periodic budgeting decisions that have no strong input-output relationship are commonly called
committed costs
discretionary costs
opportunity costs
differential costs
The basic purpose of a management control system (responsibility accounting system) is
budgeting
goal congruence
variance analysis
income measurement
The term that best refers to past costs that have been incurred and are not relevant to any future decision is
discretionary costs
incurred marginal costs
underallocated indirect costs
sunk costs
A firm earning a profit can increase its Return on Investment (ROI) by
Increasing sales revenue and operating expenses by the same dollar
Decreasing sales revenue and operating expenses by the same percentage
Increasing investment and operating expenses by the same dollar amout
Increasing sales revenues and operating expenses by the same percentage
The conversion costs consist of
direct labor
raw material, direct labor and indirect manufacturing costs
direct labor and indirect manufacturing costs
indirect manufacturing costs
Budgetary slack in cost (expense) budgets can be described as
the elimination of certain expenses to enhance budget income
the planned overestimation of budget expenses
the planned underestimation of budget expenses
actual cost minus budgeted costs
In a traditional budget the budgeted balance sheet is part of the operating budget. Correct?
yes
no
Abnormal spoilage, rework and scrap are part of
product costs (COGS)
period costs
The difference between the selling price (Revenue) of a product and its total unit costs (COGS) represents the unit
contribution margin
gross profit
net profit
gross profit margin ratio
For the month of March 2021, investment center XY had the following operating information:
Sales $ 450,000
Gross profit $ 50,000
Operating income $ 25,000
Net income (after taxes) $ 8,000
Total assets $ 500,000
Shareholders equity $ 200,000
WACC 6%
Based on the above information, which one of the following statements is correct? XY has a(n)
Return on investment 4%
Residual income of $ 5,000
Residual income of $ 22,000
Residual income of $ 4,000
Return on investment of 1,6%
A strategic business unit (SBU) has a relative high market share and a low market growth rate. According to the portfolio model for competitive analysis created by Boston Consulting Group, such an SBU is considered a
Star
Question mark
Cash cow
Dog
In a production company the unit costs for raw materials and direct labor represent
conversion costs
relevant costs
committed costs
prime costs
Which of the following is considered a pervasive constraint by the FASB's conceptual framework?
Cost
Conservatism
Timeliness
Verifiability
When the fair value of an investment in debt securities exceeds its amortized cost, how should each of the following debt securities be reported on the balance sheet at the end of the year, given the fair value option was NOT elected by the investor.
A
B
C
D
On December 31, 20x1, Evans Inc. reported an available-for-sale passive equity investment at a fair value of $ 96,450 and an unrealized loss of 19,800 in Accumulated Other Comprehensive Income (AOCI). What was the historical cost (i.e. purchase price) of the equity investment?
$ 63,595
$ 76,650
$ 96,450
$ 116,250
For the following questions, identify the one of the ten elements described in the FASB conceptual framework that best fits the given description:
Obligation to transfer resources against from a past transaction
(a)
For the following questions, identify the one of the four basic assumptions that best fits the given description:
Solectron Corporation does not adjust $ amounts in its financial statements for the effects of inflation
(a)
According to the FASB's conceptual framework, the two fundamental qualitative characteristics that make accounting information useful for decision making are
Neutrality and completeness
Fairness and precision
Relevance and faithful representation
Consistency and comparability
$ 230 unrealized holding gain
$ 230 unrealized holding loss
$ 680 unrealized holding gain
$ 680 unrealized holding loss
none of the above
$ 571
$ 266
$ -305
$ 876
none of the above
$ 571
$ 266
$ -305
$ 876
none of the above
Job order costs are more useful for
determining inventory valuation using LIFO
determining the cost of a specific project
estimating the overhead costs included in transfer prices
controlling indirect costs of future production
The SIGNA HOLDING company uses a performance reporting system that reflects the company's decentralization of decision making. The departmental performance report shows a line of date for each subordinate who reports to the group vice-president. The data presented show the actual costs incurred during the period, the budgeted costs, and all variances from budget for that subordinate's department. The SIGNA HOLDING is using a type of system called
cost benefit accounting
flexible accounting
responsibility accounting
activity based costing system
Cost drivers are ...
accounting techniques used to control costs
accounting measurements used to evaluate whether or not performance is proceeding according to plan
e.g. machine hours, computer times, or square footage of factory, used to assign costs to activities
activities that cause costs to increase or decrease as the activity increases or decreases
The LIFO (last in first out) method is allowed under US-GAAP but not under IFRS. Correct?
yes
no
An appropriate transfer price between two divisions of the Stark Company can be determined from the following date:
Fabrication Division:
Market price of subassembly $ 50
Variable cost of subassembly $ 20
Excess capacity (in units) 1,000
Assembling Division:
Nuber of units needed 900
What is the bargaining range for the two divisions?
between $20 and $ 50
between $ 50 and $ 70
$ 50 is the only acceptable price
$ 20 is the only acceptable price
between $20 and $ 35
In theory, the optimal method for establishing transfer price is
full cost plus a markup
variable cost plus markup
standard cost with a markup
(adjusted) market price
negotiated price
Which of the following is true about international transfer prices for a multinational firm?
Transfer prices must be used to minimize wordlwide taxes
Transfer prices must be based on full costs
Negotiated Transfer prices are required
Transfer prices must be based on the arm's length principle
Firms are not allowed to use market prices
The Eastern Division sells goods internally to Western Division of the same company. The quoted external price in industry publications from a supplier near Eastern is $ 200 per ton plus transportation. It costs $ 20 per ton to transport the goods to Western. Eastern's actual market cost per ton to buy the direct materials to make the transferred product is $ 100. Actual per ton direct labor is $ 50 . Other actual costs of storage and handling are $ 40. The company president selects a $ 220 transfer price. This is an example of
Market based transfer pricing
Full-cost based transfer pricing
Negotiated transfer pricing
Cost plus 20% transfer pricing
Variable cost-based transfer pricing
The performance measure(s) that induce a desirable expansion of an organisation unit as long as it earns a rate of return in excess of Weighted Average Costs of Capital (WACC) include:
I: Return on Investment (ROI)
II: Residual Income (RI)
III: Return on Sales (ROS)
I only
II only
I and II
I, II and III
II and III
Performance Measurement and evaluation of divisions (Business units) should be based on
financial measures (e.g. ROI)
customer satisfaction measures (e.g. response time)
internal business processes measures (e.g. cycle time)
combination of A and B, but not C
outcome measures (e.g. ROI) and performance drivers/leading indicators (e.g customer satisfaction ratings)
Which one of the following statements pertaining to the Return on Investment (ROI) as a performance measurement is INCORRECT?
When the average age of the assets differs substantially across segments of a business, the use of ROI may not be appropriate
ROI relies on financial measures that are capable of being independently verified, while other forms of performance measures (e.g. nonfinancial performance measures) are subjet to manipulation
The use of ROI may lead managers to reject capital investment projects that can be justified by using discounted cash flow models
The use of ROI can make in undesirable for skillfull manager to take on trouble-shooting assignments such as those involving turning around unprofitable divisions
The use of ROI may include managers of highly profitable divisions to reject projects that, from the standpoint of the corporation, should be accepted
Listed below is selected financial information for the Western Division of the Hinzel Company for the last year:
Average working capital $ 625
General and administrative expenses $ 1,075
Net sales $ 4,000
Average fixed assets $ 1,775
Cost of goods sold $ 2,525
If Hinzel treats the Western Division as an investment center for performance measurement purposes, what is the before-tax Return on Investment (ROI) for the last year?
16,67%
19,79%
22,54%
26,76%
10,00%
National Products is in the process of preparing a bid to produce meters for the federal government on a cost plus basis. While the company has produced meters for a number of years, it has only recently begun to produce meters for the government, as special equipment and processes are required to meet the government standards. In order to be competitive, the company must bid as low as possible but still make profit.
The method of cost analysis that National Products should use to compute product cost is
learning curve analysis
simple regression analysis
multiple regression analysis
decision tree analysis
network analysis
It is estimated that a particular manufacturing job is subject to an 80 percent learning curve. The first unit required 50 labor hours to complete. What is the cumulative average time per unit after eight units are completed?
50,0 hours
40,0 hours
32,0 hours
30,0 hours
25,6 hours
The average labor cost per unit for the first batch produced by a new process is $ 120. The cumulative average labor costs after the second batch is $ 72 per product. Using a batch size of 100 and assuming a learning curve continues, the total labor cost of four batches will be?
$ 4,320
$ 10,368
$ 2,592
$ 17,280
$ 28,800
Management Control systems help to keep companies focused in the proper direction. These control systems consist of the following basic components:
Budgeting, financial ratio analysis and cash management
Strategic planning, budgeting, measurement and reporting and an evaluation system
Role analysis, team building and survey feedback
Coaching, protection and challenging assignments
Strategic planning, budgeting and reward system
The starting point (foundation) of a Master Budget is the
capital budget
sales budget
cost (expense) budget
production plan
cash budget
The goals and objectives upon which an annual profit plan is based should be:
financial measures such as operating income, return on investment, residual income etc.
quantitative measures such as growth in unit sales, number of employees, manufacturing capacity, etc.
qualitative measures of organisational activity such as product innovation leadership, product quality levels, product safety, etc.
a combination of financial, quantitative and qualitative measures
a combination of financial and customer satisfaction measures
The budgeting process should be one that motivates managers and employees to work toward organisational goals. Which one of the following is LEAST likely to motivate managers?
setting budget targets at attainable levels
partizipation by subordinates in the budgetary process
having top management set the budget levels
holding subordinates accountable for the items they control
Kaizen budgeting
Budgetary slack in cost (expense) budgets can best be described as
the elimination of certain expenses to enhance budgeted income
the planned overestimation of budgeted expenses
the planned underestimation of budgeted expenses
an inflation factor used to bring historic costs to current levels
acutal cost minus budgeted cost
The use of budgetary slack does not allow the preparer to
be flexible under unexpected circumstances
makes budget targets more easily achievable
increase the probability of achieving budgeted performance
use the budget for evaluation purposes
make sales forecasts
The use of standard costs in the budgeting process signifies that an organisation has probably implemented a
flexible budget
zero-base budget
static budget
kaizen budget
activity-based budget
A firm develops an annual cash budget in order to
support the preparation of its cash flow statement for the annual report
ascertain which capital expenditure projects should be deferred
determine the opportunity costs of alternative sales and production strategies
minimize the cost of interim financing and avoid the opportunity costs of non-invested excess cash
avoid long-term solvency problems
the Financial Budget process includes
cash budget
capital expenditure budget
budgeted statement of cash flows
budgeted balance sheet
all of the above
A continuous (rolling) budget
presents the plan for only one level of activity and does not adjust to changes in the level of activity
presents the plan for a range of activity so that the plan can be adjusted for changes in activity
classifies budget requests by activity and estimates the benefits arising from each activity
drops the current quarter or month and adds a future quarter or month as the current quarter or month is completed. The budgeted amounts of other quarters or months are revised if necessary.
divides the activities of individual responsibility centers into a series of packages that are justified and prioritized
When budgets are used for performance evaluations and to set limits on spending, the process will often result in departments adding something "extra" to insure the budgets will be met. This "extra" ist
contribution margin
added value
gross profit
budgetary slack
net income
In the planning process for a firm, which one of the following should be completed first?
Sales budget
Financial budget
Cost management plan
Strategic plan (long-range plan)
Production budget
Which one of the following is NOT an advantage of Activity-Based-Budgeting (ABB)?
better identification of resource needs
linking of costs to outputs (e.g. products)
identification of budgetary slack
reduction of planning uncertainty
reduction of budgetary slack
The use of the Master Budget throughout the year as a constant comparison with actual results signifies that a master budget is a
flexible budget
capital budget
static budget
cash budget
zero-based budget
Which one of the following statements regarding the difference between a flexible budget and a static budget is true?
a flexible budget is prepared for planning purposes, while a static budget is prepared for performance evaluation
a flexible budget provides cost allowances for different levels of activity, whereas a static budget provides budgeted costs for one level of activity
a flexible budget includes only variable costs, whereas a static budget includes only fixed costs
a flexible budget is established by operating management, while a static budget is determined by top management
a flexible budget is most cases the same as a static budget
Which one of the following may be considered an independent item in preparation of the annual master budget?
ending inventory budget
capital expenditure budget
income statement
balance sheet
factory overhead budget
Cost drivers ...
are activities that cause costs to increase or decrease as the activity increases or decreases
accounting techniques used to control costs
accounting measurements used to evaluate whether or not performance is proceeding according to plan
a mechanical basis, such as machine hours, computer time, size of equipment or square footage of factory, used to assign costs to activities
activities of vital importance for realization of company's goal
A cost driver is defined as
the largest cost in a manufacturing process
the significant factor in a development of a new product
an indirect cost that cannot be traced to a particular cost objective but is essential to business
a causa factor that increases or decreases the total cost of a cost object
a leading indicator for future performance
Inventoriable costs (product costs)
include only the prime costs of manufacturing a product
include only the conversion costs of manufacturing a product
are expensed when products become part of finished goods inventory
are regarded as current assets before the products are sold
include only the direct materials
Which one of the following is LEAST likely to be an objective of a cost accounting system?
Product costing
Inventory valuation for reporting purposes
Sales commission determination
Measuring cost of sales for reporting purposes
Measuring income and assets for reporting purposes
In cost terminology, prime costs consist of
direct materials and variable factory overhead
direct labor and indirect labor
indirect labor and fixed factory overhead
direct materials and direct labor
direct labor, direct materials and variable factory overhead
Factory depreciation is
a prime cost and an inventoriable cost
a prime cost and a period cost
a conversion cost and an inventoriable cost
a conversion cost and a period cost
a discretionary cost
When production levels are expected to decline within a relevant range, what effect would be anticipated with respect to each of the following?
Variable costs per unit/Fixed costs per unit
Increase / Increase
No change / Increase
No change/ No change
Increase / No change
Decrease / Decrease
Which one of the following considers the impact of fixed factory overhead costs?
Target costing
Prime costing
Throughput Costing
Absorption Costing
Variable Costing
When only relevant (differential) manufacturing costs are taken into account for special order pricing, an essential assumption is that
all manufacturing costs are discretionary costs
manufacturing fixed and variable costs are linear
acceptance of order will not affect regular sales
acceptance of order will cause administrative variable costs to increase
selling and administrative fixed and variable costs are linear
Cardinal Company needs 20.000 units of certain part to use in its production cycle. The following information is available
Costs to Cardinal to make the part:
Direct materials $ 4
Direct labor $ 16
Variable factory overhead $ 8
Fixed factory overhead applied $ 10
Full Costs $ 38
Costs to buy the part from the Oriole Company are $ 36
If Cardinal buys the part from Oriole instead of making it, Cardinal could not use the released facilities in another manufacturing activity. 60% of the fixed factory overhead applied will continue regardless of what decision is made. In deciding wheter to make or buy the part, the total relevant costs to make the part are:
$ 760,000
$ 400,000
$ 560,000
$ 720,000
$ 640,000
Committed costs are costs that
result from a clearly measurable relationship between inputs and outputs
management decides to incur in the current period that do not have a clear cause and effect relationship between inputs and outputs
establish the present level of operation capacity and cannot be altered in the short run
are responsive to management's attention
were capitalized and amortized in prior periods
The difference between variable costs and fixed costs is
variable costs are discretionary costs and fixed costs are sunk costs
total variable costs are variable over the relevant range and fixed in the long term, while fixed costs never change
variable costs per unit are fixed over the relevant range and fixed costs per unit are variable
variable costs per unit fluctuate and fixed costs per unit remain contant
variable costs per unit change in varying increments, while fixed costs per unit change in equal increments
The term that refers to past costs that have been incurred and are NOT relevant to any future decisions is
underallocated indirect costs
incurred marginal costs
sunk costs
full absorption costs
discretionary costs
An important concept in decision making is described as "the contribution to operating income that is foregone associated with the next best alternative". This concept is called
opportunity costs
irrelevant costs
variable costs
discretionary costs
incremental costs
In a decision analysis situation, which one of the following costs is generally NOT relevant to the decision?
avoidable costs
differential costs
incremental costs
historical costs
opportunity costs
In situations when management must decide on accepting or rejecting one-time-only special orders, where there is sufficient idle capacity, which one of the following is NOT relevant to the decision?
absorption costs
differential costs
incremental costs
direct costs
variable costs
A cost that bears on observable and known relationship to a quantifiable activity base is a(n)
engineered costs
fixed costs
sunk costs
target costs
indirect costs
The weighted average method of process costing differs from the FIFO method of process costing in that the weighted-average method
requires that ending work-in-process inventory be stated in terms of equivalent units of production
considers the ending work-in-process inventory only partially complete
does not consider the degree of completion of beginning work-in-process inventory when computing equivalent units of production
can be used under any cost-flow assumption
leads to higher profits
Sussex Corporation's production cycle starts in the Mixing Department. The following information is available for the month of April:
Work-in-process, April 1 (50% complete): 40,000 units
Started in April: 240,000 units
Completed in April: 255,000 units
Work-in-process, April 30 (60% complete): 25,000 units
Direct materials are added in the beginning of the process in the Mixing Department. Using the weighted average method, what are the equivalent units of production for the month of April?
Materials 240,000
Conversion Costs 250,000
Materials 255,000
Conversion Costs 255,000
Materials 270,000
Conversion Costs 280,000
Materials 280,000
Conversion Costs 270,000
Materials 280,000
Conversion Costs 255,000
Walden Company has a process cost system using the FIFO cost flow method. All direct materials are introduced at the beginning of the process in department ONE. The following information is available for the month of January:
Work in process, January 1 (40% complete as to conversion costs): 500 units
Started in January: 2,000 units
Transferred to department TWO during January: 2,100 units
Work-in-process, January 31st (25% completed as to conversion costs): 25,000 units
What are the equivalent units of production for the month of January?
Materials 2,500
Conversion Costs 2,200
Materials 2,500
Conversion Costs 1,900
Materials 2,000
Conversion Costs 2,200
Materials 2,000
Conversion Costs 2,000
Materials 2,000
Conversion Costs 2,500
In computing the current period's manufacturing cost per equivalent unit, the FIFO method of process costing considers current period costs
only
plus cost of beginning of work-in-process inventory
less cost of beginning of work-in-process inventory
plus cost of ending work-in-process inventory
less cost of ending work-in-process inventory
In a process costing system, the weighted average method
is most appropriate when conversion costs, inventory levels and direct materials prices fluctuate
is used when accuracy in current equivalent unit costs is important
is simple to use because it takes into account only period costs
is not appropriate when a standard cost system is used
is most appropriate when a relatively wide variety of closely related standardized products are manufactured
Nike is a sport clothing manufacturer that produces and sells a wide variety of men's sportswear. Each production run is guided by a work order that details the direct materials required and the sequence of processes needed to complete and package the garment. The cost tracking system most suited for Nike's manufacturing environment is
operation costing (mixture of Job order and process costing)
process costing
job order costing
variable costing
activity-based-costing
Normal spoilage and abnormal spoilage should be classified as
normal: period cost
abnormal: period cost
normal: product cost
abnormal: period cost
normal: period cost
abnormal: product cost
normal: product cost
abnormal: product cost
normal: product cost
abnormal: extraordinary cost
Simpson Company manufactures and sells electric drills to the exacting specifications of various customers. During April Job 403 for the production of 1,100 drills was completed at the following costs per unit:
direct materials $ 10
direct labor $ 8
allocated factory overhead $ 12
sum $ 30
Final inspection of Job 403 disclosed 50 defective units and 100 spoiled units (normal spoilage). The defective drills were reworked at a total cost of $ 500 and the normal spoiled drills were sold to a jobber for $ 1,500. What would be the unit cost of the good units produced on Job 403?
$ 33
$ 28
$ 32
$ 29
$ 30
Hoyt Corporation manufactured the following units:
Saleable 5,000
Unsaleable (normal spoilage) 200
Unsaleable (abnormal spoilage) 300
Manufacturing costs totalled $ 99,000. What amount should Hoyt debit to finished goods?
$ 90,000
$ 93,600
$ 95,400
$ 98,700
$ 99,000
Kepler Optics makes lenses for telescopes. Because Kepler will only sell lenses of the highest quality, the normal spoilage during a reporting period is 1,000 units. At the beginning of the current reporting period, Kepler had 2,200 units in inventory and during the period production was started and completed on 4,000 units. Units in inventory at the end of the current reporting period were 1,500 and the units transferred out were 3,000. During this period the abnormal spoilage was
700 units
1,000 units
1,700 units
3,200 units
4,000 units
Generally, individual departmental rates rather than a plantwide rate for applying factory overhead would be used if
a company wants to adopt a standard cost system
a company's manufacturing operations are all highly automated
manufacturing overhead is the largest cost component of its production cost
a company's manufacturing operations are basically labor based
the manufactured products differ in the resources consumed from the individual departments in the plant
The appropriate method for the dispostion of under/overapplied factory overhead is
to cost of goods sold only
to finished goods inventory only
apportioned to finished goods sold and finished goods inventory
a miscellaneous expense
depends on the significance of the amount
Which one of the following alternatives correctly classifies the business application to the appropriate costing system
Job Costing System/Process Costing System
Consulting Firm / Construction Company
Wallpaper manufacturer / Oil refinery
Paint manufacturer / Investment banking
Aircraft assembly / Accounting firm
Print shop / Beverage drink manufacturer
A job order cost system uses a budgeted (predetermined) fixed factory overhead rate based on expected volume and expected fixed factory overhead cost. At the end of the year, underapplied fixed factory overhead might be explained by which of the following situations?
Actual volume / Actual fixed factory overhead
greater than expected / greater than expected
greater than expected / less than expected
less than expected / greater than expected
less than expected / less than expected
as expected / less than expected
At the end of a year, underallocated factory overhead (material amount) should be
allocated among cost of goods manufactured, finished goods inventory and cost of goods sold
charged to cost of goods sold account
allocated among work in process, finished goods inventory and cost of goods sold
recorded as a deferred charge
recorded as extraordinary loss
Prorating material (significant) over/underallocated factory overhead is necessary
for external financial accounting and tax accounting purposes
to motivate managers to pay less attention to actual overhead costs
to encourage behaviour that will cause the build up of inventories and create "phantom" inventory profits
to demotivate budget personnel from determining a highly accurate allocation base
to demotivate managers from using Activity-based costing
Under Pick's job order costing system, manufacturing overhead is applied to work in process using budgeted (predetermined) annual overhead rate. During January 2020, Pick's transactions included the following:
Direct materials issued to production $ 90,000
Direct labor costs $ 107,000
Indirect materials issued to production $ 8,000
Manufacturing overhead incurred $ 125,000
Manufacturing overhead allocated $ 113,000
Pick had neither beginning nor ending Work in Process inventory. What was the cost of jobs completed during January 2020?
302,000
310,000
322,000
330,000
443,000
Under a job order product costing system, the dollar amount of the journal entry involved in the transfer of inventory from Work in Process to Finished Goods is the sum of the costs charged to all jobs
started in process during the period
in process during the period
completed and sold during the period
completed during the period
started, completed and sold during the period
The schedule of cost of goods manufactured of Gruber Fittings, shows the following balanced for its fiscal year end:
Raw materials used in production $ 450,000
Direct manufacturing labor $ 280,000
Allocated manufacturing overhead $ 375,000
Ending work in process inventory $ 230,000
Cost of goods sold manufactured $ 1,125,000
The value of the work-in-process inventory at the beginning of the fiscal year was:
625,000
250,000
210,000
20,000
230,000
Zeta Company is preparing its Master Budget. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the information given in the picture.
Budgeted materials handling costs are $ 50,000.
Under a traditional costing system that allocates overhead on the basis of direct labor hours, the materials handling costs allocated to one unit of wall mirrors would be:
$ 1,000
$ 500
$ 2,000
$ 5,000
$ 0
Zeta Company is preparing its Master Budget. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the information given in the picture.
Budgeted materials handling costs are $ 50,000.
Under Activity-Based-Costing, the materials handling costs allocated to one unit of wall mirrors would be:
$ 1,000
$ 500
$ 1,500
$ 2,500
$ 0
The use of activity-based costing normally results in
substantially greater unit costs for low volume products than is reported by traditional product costing
substantially lower unit costs for low volume products than is reported by traditional product costing
decreased set-up costs being charged to low-volume products
equalizing set-up costs for all product lines
making pricing decisions more difficult
In an Activity Based Costing system, cost reduction is accomplished by identifying and eliminating:
Cost Drivers: no
Nonvalue-adding Activities: no
Cost Drivers: yes
Nonvalue-adding Activities: yes
Cost Drivers: no
Nonvalue-adding Activities: yes
Cost Drivers: yes
Nonvalue-adding Activities: no
What is the normal effect on the numbers of cost pools and allocation bases when an Activity-Based Costing system replaces a traditional cost system?
Cost Pools / Allocation Bases
no effect/no effect
increase/no effect
no effect/increase
increase/increase
increase/decrease
MicroBrew Northwest is a successful brewery engaged in the development and production of specialty micro brews. It uses an activity-based costing system. During the past year, it has incurred $ 1,250,000 of product development (design) costs, $ 850,000 of materials handling costs, $ 2,500,000 of production line labor costs, $ 700,000 for production set up costs and $ 1,500,000 for manufacturing facility management. The ABC cost hierarchy is as follows: output unit-level costs, batch level costs, product-sustaining costs and facility-sustaining costs.
In an ABC cost hierarchy,
$ 1,250,000 are product sustaining and $ 1,500,000 are batch level costs
3,350,000 are output unit-level and $ 1,200,000 are batch-level costs
$ 1,250,000 are product sustaining costs and $ 700,000 are batch level costs
$ 1,500,000 are facility sustaining costs and $ 850,000 are output unit-level costs
all statements are false
Activity Based Costing can be part of a
Operating Costing System / Job Costing System
Yes/Yes
No/No
Yes/No
No/Yes
Generally, in traditional cost accounting systems, which of the following is more likely to be true?
High volume products/Low volume Products
accurately costed/overcosted
overcosted/undercosted
accurately costed/undercosted
undercosted/overcosted
accurately costed/accurately costed
Which of the following statements about activity based costing is correct?
ABC, as a cost allocation procedure, is only applicable in manufacturing environments
The implementation of ABC is more appropriate in a multi-product environment
ABC is a replacement procedure for and cannot be used in conjunction with a standard costing system
ABC is not applicable to the costing of services since it is more oriented towards the manufacturing environment
The implementation of ABC is more appropriate in service organisations than in manufacturing companies
The Hersh Company uses a performance reporting system that reflects the company's decentralization of decision making. The departmental performance report shows one line of data for each subordinate who reports to the group vice-president. The data presented show the actual costs incurred during the period, the budgeted costs and all variances from budget for that subordinate's department. The Hersch Company is using a type of system called
cost benefit accounting
flexible budgeting
program budgeting
responsibility accounting
activity-based costing system
If a manufacturing company uses responsibility accounting, which one of the following items is LEAST likely to appear in a performance report for a manager of an assembly line?
direct materials
repairs
direct labor
depreciation on equipment
maintenance
A controllable expense
is an expected future expense, which will be different under various alternatives
is an expense whose actual amount will not normally differ from the standard (budget) amount
is one which is directly influenced at given level of managerial authority within a given time period
is an expense which will remain semi variable in total over the relevant range in a given time period
is always a discretionary cost (e.g. marketing)
The basic purpose of a management control system (responsibility accounting system) is
budgeting
goal congruence
authority
variance analysis
income measurement
Generally, in a highly decentralized organisation the best option for measuring the performance of divisions (business units) is the establishment of
investment centers
profit centers
revenue centers
discretionary expense centers
engineered expense centers
When comparing strategic planning with operational planning (budgeting), which one of the following statements is most appropriate?
Strategic planning is the first phase of the management control process and performed at all levels of management. Operational planning is an option.
Strategic planning (long-range planning) is the first phase of the management control process. Strategic planning is focused on the programs (products) of a company. Operational planning is detailed and results in budgeted data.
Strategic planning focuses on responsibility centers at all levels in the organisation.
Operational planning is a long-range in focus.
Strategic planning is performed only in corporate levels.
All of the following are characteristics of the strategic planning process EXCEPT the
emphasis on long run
analysis and review of departmental budgets
review of attributes and behaviour of the organisation's competition
analysis of external economic factors
analysis of competitor's strength
A firm's statement of broad objectives or mission statement should accomplish all of the following EXCEPT
outlining specific strategies for technological development, market expansion and product differentiation
defining the goal(s) of the company
stating the moral and ethical principles that guide the actions of the firm
providing an overall guide to those in high-level, decision making positions
ambitions of the company
In developing comprehensive planning and control system, the best chronological order of significant components of the system is to develop
long range goals, strategic plan, performance reports
long range goals, system of performance reports, budget and strategic plan
long range profit plan, system of performance reports, budget and then goals
system of performance reports, strategic plan, long range goals and budget plan
long range goals, strategic plan, budget and then establish a system of performance reports
Which basic force(s) drive(s) industry competition and the ultimate long-term profit potential of an industry?
I. Threat of new entrants
II. Bargaining power of suppliers
III. Bargaining power of buyers
IV. Threat of substitutes
I
I and II
I, II, III and IV
III and IV
The five basic competitive forces as defined by Porter's model determines
the long term profitability of an industry
the entrance barriers that potential players must face to get into the industry
the rivalry inside the industry
the strategy that a firm should follow to achieve its objectives
the short term profitability and competitive intensity of the industry
A successful management control system (responsibility accounting system) is dependent upon
the correct allocation of controllable variable and fixed costs
identification of the management level at which all costs are controllable
the proper delegation of responsibility and authority
a reasonable separation of costs into their fixed and variable components since fixed costs are not controllable and must be eliminated from the responsibility report
the Generally Accepted Accounting Principles (GAAP) of the USA
Which one of the following best identifies a profit center?
The Information Technology Department of a large consumer products company
A large division (business unit) of a listed corporation (invested capital is high/low)
The Production Operations Department of a small job-order shop company
A new car sales division for a large local auto agency
A staff department of a large company
Characteristics of a responsibility accounting system include the following, EXCEPT:
responsibility for performance according to budget must be linked to appropriate authority
the system should encourage employee involvement and participation
managers of expense centers are responsible for revenues as well as all common costs
each level of management ist responsible for their department's operations and employees
managers of a profit center are responsible for revenue and expenses
Arises from peripheral or incidental transactions
(a)
Obligation to transfer resources arising from a past transaction
(a)
Increases ownership interest
(a)
Declares and pays cash dividends to owners
(a)
All increases in net assets in a period from non-owner sources
(a)
Items characterized by future economic benefits
(a)
Equals increase in net assets during the year, after adding distributions to owners and subtracting investments by owners
(a)
Arises from income statement activities that constitute the entity's ongoing major or central operations.
(a)
Residual interest in the net assets of the enterprise
(a)
Increases assets through sale of product
(a)
Decreases assets by purchasing the company's own stock.
(a)
Changes in equity during the period, except those from investments by owners and distributions to owners.
(a)
The economic activities of ABC corporation are divided into 12 month periods for the purpose of issuing annual reports.
(a)
Solectron Corporation does not adjust $ amounts in its financial statements for the effects of inflation
(a)
Walgreen Co. reports current and noncurrent classifications in its balance sheet
(a)
The economic activities of General Electric and its subsidiaries are merged for accounting and reporting purposes
(a)
ABC Corporation reports revenue in its income statement in the period it is earned instead of the period when cash is collected
(a)
Yahoo Inc. recognizes depreciation expense for a machine over the 2-year-period during which that machine helps the company earn revenue
(a)
Oracle corporation reports information about pending lawsuits in the notes to its financial statements
(a)
IBM reports land on its balance sheet at the amount paid to acquire it, even though the estimated fair market value is greater
(a)
