(To obtain the answer, scroll down each box below the question.)
Inventoriable 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
assets before the products are sold.
Multiple or departmental overhead rates are
considered preferable to a single or plant-wide overhead rate when
Manufacturing is limited to a single product flowing through identical
departments in a fixed sequence.
Various products are manufactured that do not pass through the same
departments or use the same manufacturing techniques.
Cost drivers, such as direct labor, are the same over all processes.
Individual cost drivers cannot accurately be determined with respect
to cause-and-effect relationships.
The following data apply to Item 314 and 315.
Wolk Corporation is a highly automated
manufacturing firm. The vice president of finance has decided that
traditional standards are inappropriate for performance measures in an
automated environment. Labor is insignificant in terms of the total cost
of production and tends to be fixed, material quality is considered more
important than minimizing material cost, and customer satisfaction is the
number one priority. As a result, delivery performance measures have been
chosen to evaluate performance. The following information is considered
typical of the time involved to complete orders.
Wait time
From order being placed to start of
production 10.0
days
From start of production to
completion
5.0 days
Inspection
time
1.5 days
Process
time
3.0 days
Move
time
2.5 days
What is the
manufacturing cycle efficiency for this order?
25.0 percent.
13.6 percent.
37.5 percent.
69.2 percent.
What is the delivery cycle time for this order?
12 days.
15 days.
19 days.
22 days.
Because of changes that are occurring in the
basic operations of many firms, al of the following represent trends in
the way indirect costs are allocated except
Treating direct labor
as an indirect manufacturing cost in an automated factor.
Using
throughput time as an application base to increase awareness of the
costs associated with lengthened throughput time.
Preferring plant-wide
application rates that are incurring the cost of detailed allocations.
Using several machine
cost pools to measure product costs on the basis of time in a machine
center.
The costing method that is properly classified
for both external and internal reporting purposes is
External
Reporting
Internal
Reporting
Activity-based costing
Job costing.
Variable costing.
Process costing.
Yes
No
Yes
No
Yes
Yes
No
Yes
The most accurate method of allocating service
department costs is the
Reciprocal method.
Step method.
Direct method.
Accretion method.
In allocating factory service department costs
to producing departments, which one of the following items would most
likely be used as an activity base?
Units of product sold
Salary of
service department employees.
Units of electric
power consumed.
Units of finished
goods hipped to customers.
In join-product costing and analysis, which one
of the following costs is relevant when deciding the point at which a
product should be sold in order to maximize profits?
Separable costs after
the split-off point.
Joint costs to
the split-off point.
Sales salaries for the
period when the units were produced.
Purchase costs of the
materials required for the joint products.
The principal disadvantage of using the physical
quantity method of allocating joint costs is that
Costs assigned to
inventories may have no relationship to value.
Physical
quantities may be difficult to measure.
Additional processing
costs affect the allocation base.
Joint costs, by
definition, should not be separated on a unit basis.
Chapter
4 – PLANNING & CONTROL II
The foundation of a profit plan is the
Capital budget.
Sales forecast.
Cost & expense
budget.
Production plan.
A production plan should be based on
A sales forecast adjusted
for projected inventory levels.
Economic order
quantities and reorder points.
Exponential smoothing.
Average annual sales
level.
Kallert Manufacturing currently uses the company’s
budget only as a planning tool. Management has decided that it would be
beneficial to also use budgets for control purposes. In order to implement
this change the management accountant must.
Report daily to operating
management all deviations from plan.
Synchronize the
budgeting and accounting system with the organizational structure.
Organize a budget
committee.
Develop forecasting
procedures
When sales volume is seasonal in nature certain
items in the budget must be coordinated. The three most significant items
to coordinate in budgeting seasonal sales volume are
Direct labor hours,
work-in-process inventory, and sales volume.
Production
volume, finished goods inventory, and sales volume.
Raw material inventory,
direct labor hours, and manufacturing overhead costs.
Raw material inventory,
work-in-process inventory, and production volume.
The Shocker Company’s sales budget shows
quarterly sales for the next year as follows.
Quarter
1 10,000 units
Quarter
2 8,000 units
Quarter
3 12,000 units
Quarter
4 14,000 units
Company policy is to have a finished goods
inventory at the end of each quarter equal to 20 percent of the next quarter’s
sales. Budgeted production for the second quarter of the next year would be
7,200 units.
8,000 units.
8,800 units
8,400 units
The two most appropriate factors for budgeting
manufacturing overhead expenses would be
Machine hours and driver
activity.
Management
judgment and contribution margin.
Management judgment and
driver activity.
Management judgment and
sales dollars.
The Jung Corporation’s budget calls for the
following production.
Quarter
1 45,000 units
Quarter
2 38,000 units
Quarter
3 34,000 units
Quarter
4 48,000 units
Each unit of product requires three pounds of
direct material. The company’s policy is to begin each quarter with an
inventory of direct materials equal to 30 percent of that quarter’s direct
material requirements. Budgeted direct material purchases for the third
quarter would be
114,600 pounds.
89,400 pounds.
38,200
pounds.
29,800
pounds.
Chapter
6 – PERFORMANCE EVALUATION
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 Hersh
Company is using a type of system called
Cost-benefit accounting.
Flexible
budgeting.
Program budgeting
Responsibility
accounting.
Of the following items, the one item that would
not be considered in evaluating the adequacy of the budgeted annual
operating income for a company is
Earnings per share.
Industry average for
earnings on sales.
Internal rate of return.
Return on investment.
Segmented income statements are most meaningful to
managers when they are prepared
On an absorption cost
basis.
On a cost
behavior basis.
In a single-step format.
In a multiple-step
format.
The segment margin of the Wire Division of Lerner
Corporation would not include
Fixed selling expenses
of the Wire Division.
Variable selling
expenses of the Wire Division.
The Wire Division’s
fair share of the salary of Lerner Corporation’s president.
Variable manufacturing
costs of the Wire Division.
Micro Manufacturers uses an accounting system that
charges costs to the manager who has been delegated the authority to make
the decisions incurring the costs. For example, if the sales manager
accepts a rush order that requires the incurrence of additional
manufacturing costs, these additional costs are charged to the sales
manager because the authority to accept or decline the rush order was
given to the sales manager. This type of accounting system is known as
Functional accounting.
Contribution
accounting.
Transfer price
accounting.
Profitability
accounting.
The combination of management by objectives,
developed with input from the individual manager, and the budgeting
process is an example of
Flexible budgeting.
Human resource
management.
Responsibility
accounting.
Capital budgeting.
Most firms use return on investment (ROI) to
evaluate the performance of investment center managers. If top management
wishes division managers to utilize all assets without regard to
financing, the denominator in the ROI calculation will be
Total assets available.
Shareholders’
equity.
Working capital.
Working capital plus
other assets.
Residual income is a better measure for
performance evaluation of an investment center manager than return on
investment because.
The problems associated
with measuring the asset base are eliminated.
Desirable
investment decisions will not be neglected by high return divisions.
Only the gross book
value of assets needs to be calculated.
Returns do not increase
as assets are depreciated.
Chapter
9 - Ethics
A CMA has been ordered by her
supervisor to take an action that violates the IMA’s ethical standards of
competency, integrity, objectivity or confidentiality. If the ethical
dilemma is very significant the CMA should:
Report
directly to the Board of Directors and immediately inform any affected
third parties.
Never
seek an objective opinion from an outside advisor such as an attorney.
Should
exhaust the internal procedures, inform the board, submit an informative
memorandum and resign.
Never
tell the supervisor in advance that the CMA is going to go "over
his head"
