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Variable
manufacturing costs per unit of W1 are as follows:
Direct materials
$5
Direct labor
$15
Variable manufacturing overhead $10
Ithaca Tools has offered to sell Cornell Milling 10,000 units of W1 for $40 per unit. If Cornell Milling
accepts the offer, $50,000 of fixed manufacturing overhead will be eliminated.
2. HS Barker Company has sales of 1,500 units at $60 per unit. Variable
expenses are 35% of the selling price. If total fixed expenses are $40,000, the
degree of operating leverage is:
1.50
3.16
3.50
5.00
3. Which of the following can be considered to be unethical behavior?
Assigning direct labor costs to Contract A and Contract B using different rates for different
employees
Assigning different direct material costs to Contract A and Contract B based on usage
Assigning overhead costs to Contract A based on labor hours and Contract B based on
machine hours
Fixed cost
Mixed cost
Step cost
5. To compete on the basis of service, the seller must carefully manage:
The degree to which products or services meet customer's needs
Sales commissions
8. Which one of the following tools of analyses is not commonly used in cost estimation?
High-low estimation
Linear programming
Least-squares regression
Scatter diagrams
9. Which of the following would best describe a goal for your new business?
To provide high quality lawn services and make a profit.
Identify new lawn services that will attract new customers and increase revenues.
11. Eva Company sells one product at a price of $25 per unit. Variable expenses are 40 percent of
sales, and fixed expenses are $25,000. The sales dollars level required to break even are:
$ 2,500
$10,000
$33,333
$41,667
12. According to Michael Porter, which of the following is an example of cost leadership as a
business strategy?
A regional beer brewer that caters to local tastes.
A glass manufacturer utilizing research and development to identify new applications for
glass and ceramics.
An online bookseller utilizing efficient scale facilities and overhead cost control.
Avoidable costing
Conversion
Outsourcing
Networking
14. Which of the following performance factors is least relevant for a "world-class" company to
compete globally?
Price/Cost
Location
Service
Quality
15. To compete on the basis of price, the seller must carefully manage:
The degree to which products or services meet customer's needs.
$ 30,000
$ 15,000
$225,000
$300,000
19. Betsys Brew is a successful brewery engaged in the development and production of
specialty micro brews. It uses manufacturing cost hierarchy to allocate costs to various activities.
During the past year, it has incurred $1,450,000 of product development costs, $950,000 of
materials handling costs, $2,500,000 of production line labor costs, $900,000 for production
setup costs, $500,000 in power costs for cooling beer and running equipment and $1,750,000 for
manufacturing facility management.
Using the manufacturing cost hierarchy, what is the total cost that would be classified as batchlevel activity costs?
$ 900,000
$ 700,000
$1,200,000
$1,250,000
20. The following data was input into a spreadsheet program to determine the Intercept, Slope and R 2
(RSQ) for Patient Days and Maintenance Costs for a local hospital:
Month
January
February
March
April
May
June
July
Intercept
Slope
RSQ
Maintenance Costs
(Y)
6,600
$8,900
8,100
$9,500
6,000
$8,400
7,500
$9,200
8,300
$10,100
9,000
$10,800
5,200
$8,800
$5,468
$0.541
0.79
$3,431
$0.759
$0.541
21. The determination of the mathematical relationship between activity level and cost is known
as:
Cost control
Cost estimation
Cost prediction
Regression analysis
22. For which of the following manufactured products would process costing be more appropriate?
Bridge construction
Custom-made jewelry
23. Partially completed goods that are in the process of being converted into a finish product are defined
as:
Work-in-process inventories
Conversion inventories
Operational inventories
24. The following data was input into a spreadsheet program to determine the Intercept, Slope and R 2
(RSQ) for Patient Days and Maintenance Costs for a local hospital:
Month
Maintenance Costs
(Y)
6,600
$8,900
8,100
$9,500
6,000
$8,400
7,500
$9,200
8,300
$10,100
9,000
$10,800
5,200
$8,800
January
February
March
April
May
June
July
Intercept
Slope
RSQ
$5,468
$0.541
0.79
The estimated total maintenance cost for August based on an estimated 7,000 patient days is:
$9,255
$7,186
$7,985
$7,529
25. The purpose of the statement of cost of goods manufactured is to:
Calculate the cost of goods transferred to finished goods inventory during the period.
Both A and B
Identify new lawn services that will attract new customers and increase revenues
Paint
Chemicals
Liquid soap
29. The point in the production process where joint products become separately
identifiable is called:
30. Which of the following descriptions best describes the process of controlling?
Comparing the budget with actual results
Preparing a budget for an organization that meets sales goals for the upcoming year
Sunk cost
Opportunity cost
Discretionary cost
32. Which of the following would best describe planning for your new business?
Comparing the actual cash balance with the budgeted cash budget each month
36. Number of parts per unit is most appropriate as a cost driver for which of the following types
of activity costs?
Machining
Purchasing
Assembly
Payroll
37. Brahtz Company uses an activity-based costing system. It has the following manufacturing
activity areas, related cost drivers and cost allocation rates:
Activity
Cost Driver
Machine setup
Materials handling
Machining
Assembly
Number of setups
Number of parts
Machine hours
Direct labor hours
Number of finished
units
Inspection
Cost Allocation
Rate
$25.00
0.25
13.00
22.00
7.00
During the month, 100 units were produced, with no defects, requiring three setups. Each unit consisted
of 17 parts, 3 direct labor hours and 2.5 machine hours. Direct materials cost $50 per finished unit.
$ 8,675
$11,625
$13,675
$16,050
38. Which of the following would best describe controlling for your new business?
Assigning workers to perform lawn services for various clients
Comparing the actual cash balance with the budgeted cash budget each month
50,000 units
60,000 units
125,000 units
120,000 units
Job Costing
Process manufacturing
Process reengineering
44. The Apollo Delivery Service has the following information about its truck fleet miles and
operating costs:
Year Miles Operating Costs
2011 250,000 $160,000
2012 300,000 $175,000
2013 350,000 $210,000
What is the best estimate of fixed costs for fleet operating expenses in 2014 using the
high-low method?
$100,000
$ 35,000
$175,000
$ 50,000
45. Using cost-volume-profit analysis, we can conclude that a 20 percent reduction in
variable costs will:
Not affect the break-even sales volume if there is an offsetting 20 percent increase in fixed
costs
Are variable within narrowly defined ranges of activity, but constant over wider ranges of
activity
Sales commissions
48. When finished goods are sold, there is an increase in which of the following
accounts?
Cost of Goods Sold
Work-in-Process
49. Which of the following mathematical expressions best describes a mixed cost?
Y = bX
Y=a
Y = a + bX
Y = ai
50. Nickolas Rentals offers machine rental services for concrete cutting. Consider the following costs
of the company over the relevant range of 5,000 to 8,000 hours of operating time for its concrete
cutting equipment.
5,000
Total Costs:
Variable Costs
Fixed Costs
Total Costs
Cost per hour:
Variable cost
Fixed cost
Total cost per
hour
$ 40,000
168,000
$208000
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$25.00
$28.00
$32.00
$37.60