# Acct 342 final

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### Which of the following does NOT represent a cause-and-effect relationship? A) A company is charged 40 cents for each brochure printed and mailed. B) Material costs increase as the number of units produced increases. C) It makes sense that if a complex product has a large number of parts it will take longer to assemble than a simple product with fewer parts. D) Utility costs increase at the same time that insurance costs increase.

D) Utility costs increase at the same time that insurance costs increase.

D) mixed

### Quantitative analysis methods estimate cost functions: A) based on analysis and opinions gathered from various departments B) using the pooling of knowledge from each value chain function C) which depend on the experience and judgment of the analyst for accuracy D) using significant amounts of historical data

D) using significant amounts of historical data

### At the Todd Company, the cost of personnel department has always been charged to production departments based upon number or employees. Recently, opinions gathered from the department managers indicate that the number of new hires might be a better predictor of personnel costs. Total personnel costs are \$320,000. Department A B C Number of Employees 30 270 100 The number of new hires 8 12 5 If the number of employees is considered the cost driver, what amount of personnel costs will be allocated to department A?

Total # of employees = 30+270+100 = 400
Department A Allocation = 30/400 = 7.5%

320,000 x 7.5% = \$24,000

### The cost to be predicted is referred to as the: A) dependent variable B) regression C) cost driver D) independent variable

A) dependent variable

### The independent variable: A) is also referred to as the cost driver B) should have an economically plausible relationship with the dependent variable C) may also be called the cost-allocation base if referring to an indirect cost D) All of these answers are correct.

D) All of these answers are correct.

3 cost pools

CDAB

### Which cost estimation method uses a formal mathematical method to develop cost functions based on past data? A) the account analysis method B) the industrial engineering method C) the conference method D) the quantitative analysis method

D) the quantitative analysis method

### A plot of data that results in bunched points with little slope generally indicates: A) a strong relationship B) a negative relationship C) a weak relationship D) a positive relationship

C) a weak relationship

### An inaccurate cost function with a slope coefficient that is estimated too low may most likely result in: A) evaluating a weak manager as having strong performance B) promoting a product that is actually more profitable than budgeted C) initiating cost cutting measures when they are unnecessary D) predicting total costs that are too high

C) initiating cost cutting measures when they are unnecessary

### A cost function with a lower slope coefficient than a year ago could indicate that: A) rental costs have decreased B) total variable costs have decreased C) production has decreased D) new cost-cutting initiatives are beneficial

D) new cost-cutting initiatives are beneficial

### Goodness-of-fit measures how well the predicted values in a cost estimating equation: A) match the cost driver B) match the actual cost observations C) determine the level of activity D) rely on the independent variable

B) match the actual cost observations

### A learning curve is a function: A) that increases at a greater rate as workers become more familiar with their tasks B) that is linear C) where unit costs increase as productivity increases D) that measures the decline in labor-hours per unit due to workers becoming better at a job

D) that measures the decline in labor-hours per unit due to workers becoming better at a job

### An experience curve: A) only measures the decline in labor-hours per unit as units produced increases B) measures the increase in cost per unit as productivity increases C) is a narrower application of the learning curve D) measures the decline in cost per unit as production decreases for various value-chain functions such as marketing as production increases

D) measures the decline in cost per unit as production decreases for various value-chain functions such as marketing as production increases

### 16) To complete the first setup on a new machine took an employee 100 minutes. Using an 80% cumulative average-time learning curve indicates that the second setup on the new machine is expected to take:

Unit 2 = (100 x .8) x 2 = 160 minutes

Unit 1 = 100 minutes
Unit 2 = 160 - 100 minutes = 60 minutes

### The ideal database contains: A) reliably measured observations B) numerous cost driver observations C) cost driver observations spanning a wide range D) All of these answers are correct.

D) All of these answers are correct.

### 18) A steeply sloped regression line indicates: A) a strong relationship between the cost driver and costs B) a greater proportion of fixed costs than variable costs C) management should cut costs D) an economically plausible relationship exists

A) a strong relationship between the cost driver and costs

### 19) The cost components of a heater include \$35 for the compressor, \$12 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 heaters in the coming year. What cost function best represents these costs? A) y = 55,000 + 1,500X B) y = 1,500 +55,000X C) y = 55,000 +127X D) y = 1,500 + 127X

C) y = 55,000 +127X

### The Delmonico Company uses the high-low method to estimate the cost function. The information for 2011 is provided below: Highest observation of cost driver: Machine-hours: 400 Labor costs: \$20,000 Lowest observation of cost driver Machine-hours: 240 Labor costs: \$13,600 What is the slope coefficient per machine hour?

Labor costs/machine-hours:
(20,000-13,600)/(400-240) = 6,400/160 = \$40

### The dual-rate cost-allocation method classifies costs in each cost pool into a: A) variable-cost pool and a fixed-cost pool B) direct-cost pool and a reciprocal-cost pool C) used-capacity-cost pool and a practical-capacity-cost pool D) budgeted-cost pool and an actual-cost pool

A) variable-cost pool and a fixed-cost pool

### Benefits of the single-rate method include: A) information that leads to outsourcing decisions that benefit the organization as a whole B) fixed costs that are transformed into variable costs for user decision making C) it is easier to calculate D) signals regarding how variable and fixed costs behave differently

C) it is easier to calculate

### The advantage of using practical capacity to allocate costs: A) is that it focuses management's attention on managing unused capacity B) is that it allows a downward demand spiral to develop C) is that budgets are much easier to develop D) Either A or B are correct.

A) is that it focuses management's attention on managing unused capacity

### The Charmatz Corp. has a central copying facility. The copying facility has only two users, the Marketing Department and the Operations Department. The following data apply to the coming budget year: Budgeted costs of operating the copying facility for 400,000 to 600,000 copies: Fixed costs per year: \$60,000 Variable costs: 3 cents per copy Budgeted long-run usage in copies per year: Marketing Department: 120,000 copies Operations Department: 380,000 copies BUdgeted amounts are used to calculate the allocation rates. Actual usage for the year by the Marketing Department was 80,000 copies and by the Operations Department was 360,000 copies. If a single-rate cost-allocation method is used, what amount of copying facilities costs will be budgeted for the Marketing Department?

60,000 + (500,000 x 0.03)
60,000 + 15,000 = 75,000
75,000/500,000 = 0.15

0.15 x 120,000 = \$18,000

### Which of the following departments is NOT a support department for a boat manufacturing company? A) Accounting B) Personnel C) Data processing D) Molding and assembly

D) Molding and assembly

### The method that allocates costs by explicitly including all the services rendered among all support departments is the: A) reciprocal method B) direct method C) sequential method D) step-down method

A) reciprocal method

### 7) The step-down allocation method: A) recognizes the total amount of services that support departments provide to each other B) offers key input for outsourcing decisions C) allocates complete reciprocated costs D) typically begins with the support department that provides the highest percentage of its total services to other support departments

D) typically begins with the support department that provides the highest percentage of its total

### Jake's Battery company has two service departments. Maintenance and Personnel. Maintenance Department costs of \$320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of \$80,000 are allocated based on number of employees. The costs of operating departments A and B are \$160,000 and \$240,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Budgeted costs: Maintenance Department: \$320,000 Personnel Department: \$80,000 Production Department A: \$160,000 Production Department B: \$240,000 Budgeted maintenance Hours: Maintenance: NA Personnel: 800 Production A: 960 Production B: 640 Number of employees: Maint: NA Personnel: NA Prod. A: 160 Prod. B: 480 Using the direct method, what amount of Maintenance Department costs will be allocated to Department B?

640/(960+640) = 0.4
0.4 x 320,000 = 128,000

### Jake's Battery company has two service departments. Maintenance and Personnel. Maintenance Department costs of \$320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of \$80,000 are allocated based on number of employees. The costs of operating departments A and B are \$160,000 and \$240,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Budgeted costs: Maintenance Department: \$320,000 Personnel Department: \$80,000 Production Department A: \$160,000 Production Department B: \$240,000 Budgeted maintenance Hours: Maintenance: NA Personnel: 800 Production A: 960 Production B: 640 Number of employees: Maint: NA Personnel: NA Prod. A: 160 Prod. B: 480 Using the step-down method, what amount of Maintenance Department cost will be allocated to Department B, if the service department with the highest percentage of interdepartmental support service is allocated first?

640/(800+960+640) = 0.26667
320,000 x 0.26667 = 85,334

D) Accounting

B) common cost

### The Salmon Bay Corporation currently uses a manufacturing facility costing \$200,000 per year; 80% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 20% of the facility and increase the overall costs of maintaining the space by 5%. If the stand-alone method were used, what amount of cost would be allocated to the start-up business?

200,000 x 1.05 = 210,000
210,000 x 0.2 = 42,000

### The Salmon Bay Corporation currently uses a manufacturing facility costing \$200,000 per year; 80% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 20% of the facility and increase the overall costs of maintaining the space by 5%. If the incremental method were used, what amount of cost would be allocated to the start-up business?

200,000 x 0.8 = 160,000

200,000 - 160,000 = 40,000

C) CASB

### ________ is a cost that the contract parties agree to include in the costs to be reimbursed. A) An incremental cost B) An unallowable cost C) An allowable cost D) A stand-alone cost

C) An allowable cost

### Buzz's Educational Software Outlet sells two or more of the video games as a single package. Managers are keenly interested in individual product-profitability figures. Information pertaining to three bundled products and the stand-alone prices is as follows: Stand-Alone Products: Reading Fun - Price: \$25 Cost: \$3.60 Math Fun - Price: \$30 Cost: \$4.00 Analysis - Price: \$45 Cost: \$5.00 Package: Reading Fun & Math Fun - Price: \$44 Reading Fun & Analysis - Price: \$56 All three - Price \$76 Using the stand-alone method with selling price as the weight for revenue allocation, what amont of revenue will be allocated to Reading Fun in the first package (Reading Fun & Math Fun)?

25+30 = 55 Reading fun: 25/55 = 45%
Math fun: 30/55 = 55%

44 x .45 = \$20

\$25

### AAA offers towing services, auto routing, travel brochures, and other travel services for one annual fee. This is an example of: A) a joint product B) revenue allocation C) a bundled product D) revenue tracing

C) a bundled product

### ________ occurs where revenues, related but NOT traceable to individual products, are assigned to those individual products. A) Revenue tracing B) Reciprocal pricing C) Stand-alone pricing D) Revenue allocation

D) Revenue allocation

### Cost-based prices: A) are required in all government contracts B) pass the majority of risk to the buyer C) provide an inherit incentive for the producer to control costs D) are one way of setting prices in a competitive market

B) pass the majority of risk to the buyer

C) joint cost

### All costs incurred beyond the splitoff point that are assignable to one or more individual products are called: A) byproduct costs B) joint costs C) separable costs D) main costs

C) separable costs

### Byproducts and main products are differentiated by the: A) amount of total sales value B) weight or volume of outputs per period C) number of units per processing period D) None of these answers is correct.

A) amount of total sales value

### The sales value at splitoff method: A) allocates joint costs to joint products in a way that each product has an identical gross-margin percentage B) allocates joint costs to joint products on the basis of relative NRV C) allocates joint costs to joint products on the basis of the relative total sales value at the splitoff point D) allocates joint costs to joint products on the basis of a comparable physical measure at the splitoff point

C) allocates joint costs to joint products on the basis of the relative total sales value at the
splitoff point

### The benefits-received criteria for allocating joint costs indicate market-based measures are preferred because: A) other measures are more difficult to calculate B) physical measures such as volume are a clearer basis for allocating cost than other measures C) revenues are usually the best indicator of the benefits received D) None of these answers is correct.

C) revenues are usually the best indicator of the benefits received

### Yakima Manufacturing purchases trees from Cheney Lumber and processes them up to the splitoff point where two products (paper and pencil casings) are obtained. The products are then sold to an independent company that markets and distributes them to retail outlets. The following information was collected for the month of November: Trees processed: 100 trees (yield is 60,000 sheets of paper and 60,000 pencil casings and no scrap) Production: paper 60,000 sheets pencil casings 60,000 Sales: paper 58,000 at \$0.04 per page pencil casings 60,000 at \$0.10 per casing The cost of purchasing 100 trees and processing them up to the splitoff point to yield 60,000 sheets of paper and 60,000 pencil casings is \$3,000. Yakima's accounting department reported no beginning inventories and an ending inventory of 2,000 sheets of paper What is the sales value at the splitoff point for paper?

60,000 x .04 = 2,400

### Yakima Manufacturing purchases trees from Cheney Lumber and processes them up to the splitoff point where two products (paper and pencil casings) are obtained. The products are then sold to an independent company that markets and distributes them to retail outlets. The following information was collected for the month of November: Trees processed: 100 trees (yield is 60,000 sheets of paper and 60,000 pencil casings and no scrap) Production: paper 60,000 sheets pencil casings 60,000 Sales: paper 58,000 at \$0.04 per page pencil casings 60,000 at \$0.10 per casing The cost of purchasing 100 trees and processing them up to the splitoff point to yield 60,000 sheets of paper and 60,000 pencil casings is \$3,000. Yakima's accounting department reported no beginning inventories and an ending inventory of 2,000 sheets of paper If the sales value at splitoff method is used, what are the approximate joint costs assigned to ending inventory for paper?

60,000 x0.04 = 2400
60,000 x 0.10 = 6000

Allocation Weight = 2400/8400 = 0.28571
3,000 x 0.28571 = 857.13/60,000 = 0.01429 x 2000 = 28.58

### A reason why a physical-measure to allocate joint costs is less preferred than the sales value at splitoff is: A) a physical measure usually results in the costs being allocated to the product that weighs the most B) physical volume usually has little relationship to the revenue producing power of products C) a physical measure such as volume is difficult to estimate because of shrinkage D) All of these answers are correct.

D) All of these answers are correct.

### The Gows Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result. The following information was collected for the month of October: Direct Materials processed: 130,000 gallons (shrinkage was 10%) Production: condensed goat milk 52,200 gallons skim goat milk 64,800 gallons Sales: condensed goat milk \$3.50 per gallon skim goat milk \$2.50 per gallon The costs of purchasing the 130,000 gallons of unprocessed goat milk and processing it up to the splitoff point to yield a total of 117,000 gallons of salable product was \$144,480. There were no inventory balances of either product. Condensed goat milk may be processed further to yield 39,000 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of \$3 per usable gallon. Xyla can be sold for \$18 per gallon. Skim goat milk can be processed further to yield 56,200 gallons of skim goat ice cream, for an additional processing cost per usable gallon of \$2.50. The product can be sold for \$9 per gallon. There are no beginning and ending inventory balances. What is the estimated net realizable value of Xyla at the splitoff point?

Final Sales Value of total production: 39,000 x 18 = 702,000
Deduct Seperable costs: 39,000 x 3 = 117,000

702,000 - 117,000 = 585,000

### The Gows Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result. The following information was collected for the month of October: Direct Materials processed: 130,000 gallons (shrinkage was 10%) Production: condensed goat milk 52,200 gallons skim goat milk 64,800 gallons Sales: condensed goat milk \$3.50 per gallon skim goat milk \$2.50 per gallon The costs of purchasing the 130,000 gallons of unprocessed goat milk and processing it up to the splitoff point to yield a total of 117,000 gallons of salable product was \$144,480. There were no inventory balances of either product. Condensed goat milk may be processed further to yield 39,000 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of \$3 per usable gallon. Xyla can be sold for \$18 per gallon. Skim goat milk can be processed further to yield 56,200 gallons of skim goat ice cream, for an additional processing cost per usable gallon of \$2.50. The product can be sold for \$9 per gallon. There are no beginning and ending inventory balances. What is the estimated net realizable value of the skim goat ice cream at the spinoff point?

Final Sales Value = 56,200 x 9
Separable costs = 56,200 x 2.5

505,800 - 140,500 = 365,300

### The Gows Company processes unprocessed goat milk up to the splitoff point where two products, condensed goat milk and skim goat milk result. The following information was collected for the month of October: Direct Materials processed: 130,000 gallons (shrinkage was 10%) Production: condensed goat milk 52,200 gallons skim goat milk 64,800 gallons Sales: condensed goat milk \$3.50 per gallon skim goat milk \$2.50 per gallon The costs of purchasing the 130,000 gallons of unprocessed goat milk and processing it up to the splitoff point to yield a total of 117,000 gallons of salable product was \$144,480. There were no inventory balances of either product. Condensed goat milk may be processed further to yield 39,000 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of \$3 per usable gallon. Xyla can be sold for \$18 per gallon. Skim goat milk can be processed further to yield 56,200 gallons of skim goat ice cream, for an additional processing cost per usable gallon of \$2.50. The product can be sold for \$9 per gallon. There are no beginning and ending inventory balances. Using the sales value at splitoff method, what is the gross-margin percentage for condensed goat milk at the splitoff point?

Sales Value at splitoff point:
Condensed: 52,200 x 3.5 = 182,700
Skim: 64,800 x 2.5 = 162,000
Weighting: 182,700 / (182,700+162,000) = 0.53
Joint Costs Allocated: 144,480 x 0.53 = 76,574

Revenues = 182,700
Less Production Costs = 76,574
Gross Margin: 106,126

106,126/182,700 = 58.1%

### When a product is the result of a joint process, the decision to process the product past the splitoff point further should be influenced by the: A) extra operating income earned past the splitoff point B) portion of the joint costs allocated to the individual products C) extra revenue earned past the splitoff point D) total amount of the joint costs

A) extra operating income earned past the splitoff point

### Which cost allocation method should NOT be used to eliminate the conflict between decision making and performance evaluation? A) NRV B) physical measures C) sales value at splitoff D) constant gross-margin percentage NRV

B) physical measures

### What factor most often drives joint cost allocation? A) selling prices B) performance evaluation C) simplicity of the method D) manager compensation

A) selling prices

### Which method of accounting recognizes byproducts in the financial statements at the time their production is completed? A) sale method B) production method C) production allocation method D) None of these answers is correct.

B) production method

### Athens Company processes 15,000 gallons of direct materials to produce two products, Product X and Product Y. Product X sells for \$8 per gallon and Product Y, the main product, sells for \$100 per gallon. The following information is for August: Product X: Production - 4375 Sales - 4000 Beg. Inv - 0 End. Inv - 375 Product Y: Production - 10000 Sales 9625 Beg. Inv - 125 End. Inv - 500 Manufacturing costs totaled \$30,000 What is the byproduct's net revenue reduction if byproducts are recognized in the general ledger during production and their revenues are a reduction of cost?

Sales of byproduct x price = 4,000 x 8 = 32,000

\$0

### What is the reason that accountants do NOT like to carry inventory at net realizable value? A) NRV recognizes income before sales are made B) NRV is acceptable to the taxing authorities C) NRV recognizes income after the sale is complete D) NRV is the most difficult costing method

A) NRV recognizes income before sales are made

### The focus of joint costing is on allocating costs to individual products: A) at the end of production B) after the splitoff point C) at the splitoff point D) before the splitoff point

C) at the splitoff point

C) byproducts

### Costing systems that are used for the costing of like or similar units of products in mass production are called: A) job-costing systems B) inventory-costing systems C) weighted-average costing systems D) process-costing systems

D) process-costing systems

### An example of a business which would have no beginning or ending inventory but which could use process costing to compute unit costs would be a: A) manufacturer of large TVs B) manufacturer of custom houses C) clothing manufacturer D) corporation whose sole business activity is processing the customer deposits of several banks

D) corporation whose sole business activity is processing the customer deposits of several
banks

### The purpose of the equivalent-unit computation is to: A) assist the business in determining the cost assigned to ending inventory and work-inprocess inventory. B) convert completed units into the amount of partially completed output units that could be made with that quantity of input C) convert partially completed units into the amount of completed output units that could be made with that quantity of input D) Both B and C are correct.

D) Both B and C are correct.

### When a Bakery transfers goods from the Mixing Department to the Baking Department, the accounting entry is: A) Dr: Work in Process  M i xi ng Depar tment Cr:Work in Process  Baki ng Depar tment B) Dr:Work in Process  Baki ng Depar tment Cr:Work in Process  M i xi ng Depar tment C) Dr:Work in Process  Baki ng Depar tment Cr:Accounts Payable D) Dr:Work in Process  M i xi ng Depar tment Cr:Accounts Payable

B) Dr:Work in Process  Baki ng Depar tment
Cr:Work in Process  M i xi ng Depar tment

### The weighted-average process-costing method calculates the equivalent units by: A) considering only the work done during the current period B) the equivalent units completed during the current period plus the equivalent units in ending inventory C) the units started during the current period plus the units in ending inventory D) the units started during the current period minus the units in ending inventory

B) the equivalent units completed during the current period plus the equivalent units in ending inventory

### In the computation of the cost per equivalent unit, the weighted-average method of process costing considers all the costs: A) that have entered work in process during the current accounting period from the units started or transferred in plus the costs associated with ending inventory B) entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period C) costs that have entered work in process from the units started or transferred in during the current accounting period D) that have entered work in process during the current accounting period from the units started or transferred in minus the costs associated with ending inventory

B) entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period

### A distinct feature of the FIFO process-costing method is that the: A) work done on ending inventory is kept separate from the work done during the current period in the calculation of equivalent units and is usually not included in the calculation B) FIFO process-costing method is only minimally different from the weighted-average process-costing method C) work done on beginning inventory before the current period is blended with the work done during the current period in the calculation of equivalent units D) work done on beginning inventory before the current period is kept separate from the work done during the current period in the calculation of equivalent units

D) work done on beginning inventory before the current period is kept separate from the work done during the current period in the calculation of equivalent units

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