ACCT 434 (Advanced Cost Management) Devry
Week 1 Quiz 1
1- (TCO 1) The average cost data are for In-Sync Fixtures Company’s (a retailer) only two product lines, Marblette and Italian Marble.
2- (TCO 1) The allocation of indirect costs in an activity-based costing system
3- (TCO 1) Evaluating customer reaction of the trade-off of giving up some features of a product for a lower price would best fit which category of management decisions under activity-based management?
4- (TCO 1) A company produces three products; if one product is overcosted then
5- (TCO 1) To set realistic selling prices
6- (TCO 1) Different products consume different proportions of manufacturing overhead costs because of differences in all of the following EXCEPT
7- (TCO 1) A well-designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis
8- (TCO 1) Companies use ABC system information to
9- (TCO 1) For service organizations that bill customers at a predetermined average rate, activity-based cost systems can help to
10- (TCO 1) Danielle Company produces a special spray nozzle. The budgeted indirect total cost of inserting the spray nozzle is $180,000. The budgeted number of nozzles to be inserted is 60,000. What is the budgeted indirect cost allocation rate for this activity?
Week 2 Quiz 1
1- (TCO 2) Operating budgets and financial budgets
2- (TCO 2) To gain the benefits of budgeting, ________ must understand and support the budget.
3- (TCO 2) Which budget is not necessary to prepare the budgeted balance sheet?
4- (TCO 2) A feature of a standard-costing system is that the costs of every product or service planned to be worked on during the period can be computed at the start of that period. This feature of standard costing makes it possible to
5- (TCO 2) An unfavorable variance indicates that
6- (TCO 2) Which of the following statements is true about overhead cost variance analysis using activity-based costing?
7- (TCO 2) Overhead costs have been increasing due to all of the following except
8- (TCO 2) Katie Enterprises reports the year-end information from 20X8 as follows: Sales (70,000 units) $560,000; Cost of goods sold 210,000; Gross margin 350,000; Operating expenses 200,000; Operating income $150,000. Katie is developing the 20X9 budget.
9- (TCO 2) Hester Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1, 2008, through June 30, 2009.
10- (TCO 2) Information pertaining to Brenton Corporation’s sales revenue is presented in the following table:
Week 2 Quiz 2
1- (TCO 2) Benchmarking is
2- (TCO 2) To gain the benefits of budgeting, ________ must understand and support the budget.
3- (TCO 2) Which budget is not necessary to prepare the budgeted balance sheet?
4- (TCO 2) A flexible budget
5- (TCO 2) An unfavorable variance indicates that
Week 3 Quiz
1- (TCO 3) Dougherty Company employs 20 individuals. Eight employees are paid $12 per hour and the rest are salaried employees paid $3,000 a month. How would total costs of personnel be classified?
2- (TCO 3) For January, the cost components of a picture frame include $0.35 for the glass, $0.65 for the wooden frame, and $0.80 for assembly. The assembly desk and tools cost $400. A total of 1,000 frames is expected to be produced in the coming year. What cost function best represents these costs?
3- (TCO 3) Which cost estimation method uses a formal mathematical method to develop cost functions based on past data?
4- (TCO 3) Penny’s TV and Appliance Store is a small company that has hired you to perform some management advisory services. The following information pertains to 20X8 operations: Sales (2,000 televisions) $900,000; Cost of goods sold $400,000; Store manager’s salary per year $70,000; Operating costs per year $157,000; Advertising and promotion per year $15,000;
5- (TCO 4) The formal process of choosing among alternatives is known as a(n)
6- (TCO 4) When using the five-step decision process, which one of the following steps should be done last?
7- (TCO 4) Sunk costs
8- (TCO 4) Northwoods Incorporated manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $90 per table, consisting of 80% variable costs and 20% fixed costs. The company has surplus capacity available. It is Northwoods’ policy to add a 50% markup to full costs. A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style.
9- (TCO 5) Throughput contribution equals revenues minus
10- (TCO 5) A machine has been identified as a bottleneck and the source of the constraint for a manufacturing company that has multiple products and multiple machines. One way the company can overcome the bottleneck is
Week 4 Midterm Exam
Midterm Set 1
Page: One (TCO1) ABC systems create
(TCO 1) Merriamn Company provides the following ABC costing information:
. How much of the account billing cost will be assigned to Department B?
(TCO 2) A master budget
(TCO 2) Dalyrymple Company produces a special spray nozzle. The budgeted indirect total cost of inserting the spray nozzle is $80,000. The budgeted number of nozzles to be inserted is 40,000. What is the budgeted indirect cost allocation rate for this activity?
(TCO 3) Which cost estimation method analyzes accounts in the subsidiary ledger as variable, fixed, or mixed using qualitative methods?
(TCO 4) In evaluating different alternatives, it is useful to concentrate on
(TCO 5) The theory of constraints is used for cost analysis when
(TCO 5) Schmidt Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows:
..Phil Company has offered to sell 10,000 units of the same part to Schmidt Corporation for $18 per unit. Assuming there is no other use for the facilities, Schmidt should
(TCO 3) The cost function y = 100 + 10X
(TCO 4) Sunk costs
Page: Two (TCO 1) For each of the following drivers identify an appropriate activity. a. # of machines b. # of setups c. # of inspections d. # of orders e. # of runs f. # of bins or aisles g. # of engineers
(TCO 2) Favata Company has the following information:
In addition, the cost of goods sold rate is 70% and the desired inventory level is 30% of next month’s cost of sales. Prepare a purchases budget for July through September.
(TCO 3) Patrick Ross, the president of Ross’s Wild Game Company, has asked for information about the cost behavior of manufacturing overhead costs. Specifically, he wants to know how much overhead cost is fixed and how much is variable. The following data are the only records available:
Using the high-low method, determine the overhead cost equation. Use machine-hours as your cost driver.
(TCO 5) Kirkland Company manufactures a part for use in its production of hats. When 10,000 items are produced, the costs per unit are:
.Mike Company has offered to sell to Kirkland Company 10,000 units of the part for $6.00 per unit. The plant facilities could be used to manufacture another item at a savings of $9,000 if Kirkland accepts the offer. In addition, $1.00 per unit of fixed manufacturing overhead on the original item would be eliminated. a. What is the relevant per unit cost for the original part? b. Which alternative is best for Kirkland Company? By how much?
(TCO 1) For each of the following drivers identify an appropriate activity. a. # of machines b. # of setups c. # of inspections d. # of orders e. # of runs f. # of bins or aisles g. # of engineers
(TCO 2) Favata Company has the following information:
In addition, the cost of goods sold rate is 70% and the desired inventory level is 30% of next month’s cost of sales. Prepare a purchases budget for July through September.
(TCO 3) Patrick Ross, the president of Ross’s Wild Game Company, has asked for information about the cost behavior of manufacturing overhead costs. Specifically, he wants to know how much overhead cost is fixed and how much is variable. The following data are the only records available:
Using the high-low method, determine the overhead cost equation. Use machine-hours as your cost driver.
(TCO 5) Kirkland Company manufactures a part for use in its production of hats. When 10,000 items are produced, the costs per unit are:
Mike Company has offered to sell to Kirkland Company 10,000 units of the part for $6.00 per unit. The plant facilities could be used to manufacture another item at a savings of $9,000 if Kirkland accepts the offer. In addition, $1.00 per unit of fixed manufacturing overhead on the original item would be eliminated. a. What is the relevant per unit cost for the original part? b. Which alternative is best for Kirkland Company? By how much?
Midterm Set 2
(TCO 1) Which of the following is a sign that an ABC system may be useful?
(TCO 1) Merriamn Company provides the following ABC costing information:
How much of the account billing cost will be assigned to Department B?
(TCO 2) Budgeting provides all of the following EXCEPT
(TCO 2) White planned to use $82 of material per unit but actually used $80 of material per unit, and planned to make 1,200 units but actually made 1,000 units. The flexible-budget variance is
(TCO 3) The conference method estimates cost functions
(TCO 4) In evaluating different alternatives, it is useful to concentrate on
(TCO 5) Producing more nonbottleneck output
(TCO 5) Schmidt Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows:
…..Phil Company has offered to sell 10,000 units of the same part to Schmidt Corporation for $18 per unit. Assuming there is no other use for the facilities, Schmidt should
(TCO 3) The cost components of an air conditioner include $35 for the compressor, $11.50 for the sheet-molded compound frame, and $80 per unit for assembly. The factory machines and tools cost is $55,000. The company expects to produce 1,500 air conditioners in the coming year. What cost function best represents these costs?
(TCO 1) For each of the following activities, identify an appropriate activity-cost driver. a. machine maintenance b. machine setup c. quality control d. material ordering e. production scheduling f. warehouse expense g. engineering design
(TCO 2) Lubriderm Corporation has the following budgeted sales for the next six-month period
Prepare a purchases budget in pounds for July, August, and September, and give total purchases in both pounds and dollars for each month.
(TCO 3) As part of his job as cost analyst, Max Thompson collected the following information concerning the operations of the Machining Department:
.Use the high-low method to determine the estimating cost function with machine-hours as the cost driver.
(TCO 5) Collier Bicycles has been manufacturing its own wheels for its bikes. The company is operating at 100% capacity, and variable manufacturing overhead is charged to production at the rate of 30% of direct labor cost. The direct materials and direct labor cost per unit to make the wheels are $1.50 and $1.80, respectively. Normal production is 200,000 wheels per year……? Justify your answer.
(TCO 1) For each of the following activities, identify an appropriate activity-cost driver. a. machine maintenance b. machine setup c. quality control d. material ordering e. production scheduling f. warehouse expense g. engineering design
(TCO 2) Lubriderm Corporation has the following budgeted sales for the next six-month period
Prepare a purchases budget in pounds for July, August, and September, and give total purchases in both pounds and dollars for each month.
(TCO 3) As part of his job as cost analyst, Max Thompson collected the following information concerning the operations of the Machining Department: Observation Machine-hours Total Operating Costs January 4,000 $45,000 February 4,600 49,500 March 3,800 45,750 April 4,400 48,000 May 4,500 49,800 Use the high-low method to determine the estimating cost function with machine-hours as the cost driver.
(TCO 5) Collier Bicycles has been manufacturing its own wheels for its bikes. The company is operating at 100% capacity, and variable manufacturing overhead is charged to production at the rate of 30% of direct labor cost. The direct materials and direct labor cost per unit to make the wheels are $1.50 and $1.80, respectively. Normal production is 200,000 wheels per year. A supplier offers to make the wheels at a price of $4 each. If the bicycle company accepts this offer……
(TCO 4) Sunk costs Answer; Are past costs.
Week 5 Quiz 1
1- (TCO 7) Major influences of competitors, costs, and customers on pricing decisions are factors of
2- (TCO 7) The first step in implementing target pricing and target costing is
3- (TCO 7) The markup percentage is usually higher if the cost base used is
4- (TCO 7) An understanding of life-cycle costs can lead to
5- (TCO 7) Pritchard Company manufactures a product that has a variable cost of $30 per unit. Fixed costs total $1,500,000, allocated on the basis of the number of units produced. Selling price is computed by adding a 20% markup to full cost. How much should the selling price be per unit for 300,000 units?
6- (TCO 8) A product may be passed from one subunit to another subunit in the same organization. The product is known as
7- (TCO 8) Transfer prices should be judged by whether they promote
8- (TCO 8) When an industry has excess capacity, market prices may drop well below their historical average. If this drop is temporary, it is called
9- (TCO 8) An advantage of using budgeted costs for transfer pricing among divisions is that
10- (TCO 8) The seller of Product A has no idle capacity and can sell all it can produce at $20 per unit. Outlay cost is $4. What is the opportunity cost, assuming the seller sells internally?
Week 5 Quiz 2 : 10 MCQ’s
Week 6 Quiz:
1- (TCO 9) To guide cost allocation decisions, the benefits-received criterion
2- (TCO 9) A challenge to using cost-benefit criteria for allocating costs is that
3- (TCO 9) The MOST likely reason for NOT allocating corporate costs to divisions include that
4- (TCO 9) Identifying homogeneous cost pools
5- (TCO 9) The Hassan Corporation has an electric mixer division and an electric lamp division. Of a $20,000,000 bond issuance, the electric mixer division used $14,000,000 and the electric lamp division used $6,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year. What amount of interest costs should be allocated to the electric lamp division?
6- (TCO 10) All of the following are methods that aid management in analyzing the expected results of capital budgeting decisions EXCEPT the
7- (TCO 10) Assume your goal in life is to retire with $1.5 million. How much would you need to save at the end of each year if interest rates average 5% and you have a 25-year work life?
8- (TCO 10) The definition of an annuity is
9- (TCO 10) A “what-if” technique that examines how a result will change if the original predicted data are not achieved or if an underlying assumption changes is called
10- (TCO 10) Shirt Company wants to purchase a new cutting machine for its sewing plant. The investment is expected to generate annual cash inflows of $300,000. The required rate of return is 12% and the current machine is expected to last for four years.
Week 7 Quiz:
1- (TCO 11) The four cost categories in a cost of quality program are
2- (TCO 11) ________ is a formal means of distinguishing between random and nonrandom variation in an operating process
3- (TCO 11) Which of the following is NOT one of the steps in managing bottlenecks under the theory of constraints?
4- TCO 11) Scrap is an example of
5- (TCO 11) Regal Products has a budget of $900,000 in 20X6 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $60,000 in variable costs. The new method will require $18,000 in training costs and $120,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 150,000 units.
6- (TCO 12) Which of the following is NOT a major feature of a just-in-time production system?
7- (TCO 12) Quality costs include
8- (TCO 12) Which of the following statements about the economic-order-quantity decision model is FALSE?
9- (TCO 12) When using a vendor-managed inventory system to enhance the features of supply-chain management, a challenging issue is
10- (TCO 12) Liberty Celebrations, Inc., manufactures a line of flags. The annual demand for its flag display is estimated to be 100,000 units. The annual cost of carrying one unit in inventory is $1.60, and the cost to initiate a production run is $40. There are no flag displays on hand but Liberty had scheduled 60 equal production runs of the display sets for the coming year, the first of which is to be run immediately. Liberty Celebrations has 250 business days per year. Assume that sales occur uniformly throughout the year and that production is instantaneous.
If Liberty Celebrations does not maintain a safety stock, the estimated total carrying cost for the flag displays for the coming year is
Week 7 Quiz 2 : 10 MCQ’s
Week 8 Final Exam
(TCO 1) If products are alike, then for costing purposes (Points : 5)
(TCO 1) Ireland Company produces a special spray nozzle. The budgeted indirect total cost of inserting the spray nozzle is $180,000. The budgeted number of nozzles to be inserted is 80,000. What is the budgeted indirect cost allocation rate for this activity? (Points : 5)
(TCO 2) Fixed overhead costs include (Points : 5)
(TCO 2) Information pertaining to Brenton Corporation’s sales revenue:
…Management estimates that 5% of credit sales are not collectible. Of the credit sales that are collectible, 75% are collected in the month of sale and the remainder in the month following the sale. Cost of purchases
(Points : 5)
(TCO 2) Budgeting provides all of the following EXCEPT (Points : 5)
(TCO 3) The cost function y = 1,000 + 5X (Points : 5)
(TCO 3) Which cost estimation method analyzes accounts in the subsidiary ledger as variable, fixed, or mixed using qualitative methods? (Points : 5)
(TCO 4) Sunk costs (Points : 5)
(TCO 5) In the theory of constraints, the only direct costs are (Points : 5)
(TCO 5) Keeping the bottleneck operation busy and subordinating allnonbottleneck operations to the bottleneck operation involves (Points : 5
(TCO 6) What type of cost is the result of an event that results in more than one product or service simultaneously? (Points : 5)
(TCO 6) Which of the following is a disadvantage of the physical-measure method…..? (Points : 5)
(TCO 7) An understanding of life-cycle costs can lead to (Points : 5)
(TCO 7) Each month, Haddon Company has $300,000 total manufacturing costs (20% fixed) and $125,000 distribution and marketing costs (75% fixed). Haddon’s monthly sales are $600,000. The markup percentage on full cost to arrive at the target (existing) selling price is (Points : 5)
(TCO 8) The costs used in cost-based transfer prices (Points : 5)
(TCO 8)The seller of Product A has no idle capacity and can sell all it can produce at $25 per unit. Outlay cost is $10. What is the opportunity cost, assuming the seller
? (Points : 5)
(TCO 8) When companies do not want to use market prices or find it too costly, they typically use ________ prices, even though suboptimal decisions may occur. (Points : 5)
(TCO 9) To guide cost allocation decisions, the benefits-received criterion (Points : 5)
(TCO 9) The Hassan Corporation has an electric mixer division and an electric lamp division. Of a $50,000,000 bond issuance, the electric mixer division used $24,000,000 and the electric lamp division used $26,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year. What amount of interest costs should be allocated to the electric lamp division? (Points : 5)
(TCO 10) A “what-if” technique that examines how a result will change if the original predicted data are not achieved or if an underlying assumption changes is called (Points : 5)
(TCO 10) Shirt Company wants to purchase a new cutting machine for its sewing plant. The investment is expected to generate annual cash inflows of $500,000. The required rate of return is 12% and the current machine is expected to last for four years. What is the maximum dollar amount Shirt Company would be willing to spend for the machine, assuming its life is also four
.. (Points : 5)
(TCO 11) The four cost categories in a cost of quality program are (Points : 5)
(TCO 11) Regal Products has a budget of $900,000 in 20X6 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $60,000 in variable costs. The new method will require $18,000 in training costs and $120,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 200,000 units. Appraisal costs for the year are budgeted at $600,000. The new prevention procedures
? (Points : 5)
(TCO 12) The costs associated with storage are an example of which
..? (Points : 5)
(TCO 12) Liberty Celebrations, Inc., manufactures a line of flags. The annual demand for its flag display is estimated to be 100,000 units. The annual cost of carrying one unit in inventory is $1.60, and the cost to initiate a production run is $100. There are no flag displays on hand but Liberty had scheduled 70 equal production runs of the display sets for the coming
(Points : 5)
(TCO 2) Russell Company has the following projected account balances for June 30, 20X9:
Prepare a budgeted income statement AND a budgeted balance sheet as of June 30, 20X9. (Points : 25)
(TCO 5) Steven’s Medical Equipment Company manufactures hospital beds. Its most popular model, Deluxe, sells for $5,000. It has variable costs totaling $2,800 and fixed costs of $1,000 per unit, based on an average production run of 5,000 units. It normally has four production runs a year, with $600,000 in setup costs each time. Plant capacity can handle up to six runs a year for a total of 30,000 beds. A competitor is introducing a new hospital bed similar to Deluxe that will
..? (Points : 25)
(TCO 7) Dulce Greeting Cards Incorporated is starting a new business venture and is in the process of evaluating its product lines. Information for one new product, traditional parchment grade cards, is as follows: ? For 16 times each year, a new card design will be put into production. Each new design will require $300 in setup costs. ? The parchment grade card product line incurred $75,000 in development costs and is expected to be produced over the next four years.
(Points : 25)
(TCO 8) Novacar Company manufactures automobiles. The red car division sells its red cars for $25,000 each to the general public. The red cars have manufacturing costs of $12,500 each for variable and $5,000 each for fixed costs. The division’s total fixed manufacturing costs are $25,000,000
..(Points : 25)
(TCO 11) For supply item LK, Boatman Company has been ordering 125 units based on the recommendation of the salesperson who calls on the company monthly. The company has hired a new purchasing agent, who wants to start using the economic-order-quantity method and its supporting decision elements. She has gathered the following
Determine the EOQ, average inventory, orders per year, average daily demand, reorder point, annual ordering costs, and annual carrying costs. (Points : 25)
