ACC 512 ch15 Exercise

Question

1. If the net variance of a business using standard costing is significant relevant to total production cost, the net variance should be:
A. assigned to cost of goods sold.
B. allocated between work in process, finished goods, and cost of goods sold.
C. carried forward to the next accounting period.
D. none of the above.

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2. If the net of all variances is immaterial relative to the total production costs incurred during the period, the net variance is:
A. treated as an adjustment to cost of goods sold.
B. ignored.
C. treated as an adjustment to work in process, finished goods, and cost of goods sold.
D. treated as an adjustment to manufacturing overhead.

3. The preferred format for a segmented income statement emphasizes:
A. direct and common fixed costs.
B. variable and fixed costs.
C. operating expenses and fixed costs.
D. variable costs and operating expenses.

4. Which of the following is a true statement pertaining to segment income statements?
A. Only present the individual segments’ net income, not total company net income.
B. Only include variable costs.
C. Do not present a segment margin.
D. Do not include arbitrarily allocated common fixed expenses when calculating segment margin.
E. All of the above.

5. How is performance evaluated for a cost center?
A. Actual costs incurred compared to budgeted costs.
B. Actual segment margin compared to budgeted segment margin.
C. Comparison of actual and budgeted return on investment (ROI) based on segment margin and assets controlled by the segment.
D. None of the above.

6. How is performance evaluated for a profit center?
A. Actual costs incurred compared to budgeted costs.
B. Actual segment margin compared to budgeted segment margin.
C. Comparison of actual and budgeted return on investment (ROI) based on segment margin and assets controlled by the segment.
D. None of the above.

7. The key to analyzing a sell as is or process further decision is to determine that:
A. opportunity costs exceed sunk costs.
B. incremental revenues exceed incremental costs.
C. differential costs do not exist.
D. all allocated costs are included in the decision.

8. In a make or buy decision which of the following costs would be considered relevant?
A. Avoidable costs.
B. Unavoidable costs.
C. Sunk costs.
D. Allocated costs.

9. Which of the following qualitative factors favors the buy option in the make or buy decision?
A. Production scheduling.
B. Utilization of idle capacity.
C. Ability to control quality.
D. Technical expertise of supplier.

10. Product Z sells for $18 per unit as is but if it is enhanced it can be sold for $24 per unit. The enhancement process will cost $50,000 for 10,000 units. If the 10,000 units of Product Z are sold as is without further processing, the company:
A. will incur an incremental profit of $10,000.
B. will incur an opportunity cost of $10,000.
C. will incur an incremental profit of $1 per unit.
D. will incur an incremental loss of $6 per unit.

11. A(n) _____________ is the minimum cost that can be incurred, which when subtracted from the selling price, allows for a desired profit to be earned.
A. relevant cost.
B. opportunity cost.
C. incremental cost.
D. target cost.

12. Product X sells for $80 per unit in the marketplace and ABC Company requires a 35% minimum profit margin on all product lines. In order to compete in this market, the target cost for Product X must be equal to or lower than:
A. $28
B. $45
C. $52
D. $80

13. Which of the following costs are not relevant in a decision to continue or discontinue a segment of the organization?
A. Avoidable costs.
B. Unavoidable costs.
C. Opportunity costs.
D. Differential costs.

14. The decision to continue or discontinue a segment of the business should focus on:
A. sales minus total variable expenses and total fixed expenses.
B. sales minus total variable expenses and avoidable fixed expenses of the segment.
C. sales minus total variable expenses and allocated fixed expenses of the business.
D. none of the above.

15. The decision for solving production mix problems involving multiple products and scarce production resources should focus on:
A. gross profit of each product.
B. sales price of each product.
C. contribution margin per unit of scarce resource.
D. contribution margin of each product.

16. XYZ Company produces three products: A, B, and C. Product A has a contribution margin of $20 and requires 1 hour of machine time. Product B has a contribution margin of $30 and requires 2 hours of machine time. Product C has a contribution margin of $36 and requires 1.5 hours of machine time. If machine hours are considered scarce, in what product mix order should XYZ Company schedule the production of Products A, B, and C for the available machine hours?
A. First A, then B, then C.
B. First C, then A, then B.
C. First C, then B, then A.
D. First B, then C, then A.

17. A principal difference between operational budgeting and capital budgeting is the time frame of the budget. Because of this difference, capital budgeting:
A. is an activity that involves only the financial staff.
B. is done on a rolling budget period basis.
C. focuses on the present value of cash flows from investments.
D. is concerned with a long-term net income forecast.

18. Capital budgeting differs from operational budgeting because:
A. depreciation calculations are required.
B. it considers the time value of money.
C. operating expenses are not relevant.
D. capital budgets don’t affect cash flow.

19. Capital expenditure analysis, which leads to the capital budget, attempts to determine the impact of a proposed capital expenditure on the organization’s:
A. segment margin.
B. contribution margin.
C. ROI.
D. cost of capital.

Essay:

1. The cost formula for the maintenance department of the Eifel Co. is $6,500 per month plus $3.50 per machine hour used by the production department.

a. Calculate the maintenance cost that would be budgeted for the month of May in which 5,700 machine hours are planned to be used.
b. Prepare an appropriate performance report for the maintenance department assuming that 5,860 machine hours were actually used in the month of May, and the total maintenance cost incurred was $28,010.

2. Breaded Oak, Inc. has a policy that requires 20 percent of the expected sales of its product to be on hand at the end of the prior month. Forecasted sales, in units, for the months of January through April are as follows:

(a.) Calculate the number of units planned for ending inventory for January, February, and March.
(b.) Calculate the number of units budgeted to be produced in January, February, and March.

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