B3 (1/2 BV)

Question 1

Inventorable costs are regarded as

Answer 1

assets before the products are sold

Question 2

Conversion costs include

Answer 2

indirect labor (Overhead), indirect materials (Overhead) , and direct labor. Can be used when the customer furnishes the material used in manufacturing a product.

Question 3

Direct labor (Conversion Cost) is both

Answer 3

both a product cost and a prime cost

Question 4

Product costs

Answer 4

are direct material, direct labor and overhead

Question 5

The treatment of sales commissions and abnormal spoilage charges when calculating

Answer 5

manufactured goods inventoriable costs are exclude both sales commissions and abnormal spoilage

Question 6

Product costs is assigned

Answer 6

to goods that were either purchased or manufactured for resale

Question 7

Calculate Prime Cost

Answer 7

Beginning Balance direct materials
Plus Purchases
Plus transportation in
Less Purchase returns and allowances
Materials Available
Less cost of materials used
Ending Balance direct materials
Direct Materials
Plus Direct Labor
= Prime Cost

Question 8

Calculate Conversion Cost

Answer 8

Beginning Inventory
+ Material
+ Labor
+ Overhead

Question 9

Computer programmers who meet customers special requirements pay should be categorized as

Answer 9

direct costs and value adding costs

Question 10

Example of direct labor is __________ , example of indirect labor is __________________

Answer 10

Example of direct labor is loom operators (most operators) , example of indirect labor is factory foreman and machine mechanics

Question 11

The purpose of cost allocation is

Answer 11

measuring income and assets for external reporting

Question 12

Variable costs is

Answer 12

is cost that is fixed per unit

Question 13

Costs would decrease if

Answer 13

production levels were increased within the relevant range of fixed costs per unit

Question 14

Relevant range is the range over

Answer 14

which cost relationship are valid

Question 15

What are:
1)Mixed Cost
2) Carrying Costs
3) Sunk Costs
4) Committed Costs

Answer 15

1) Mixed Cost: includes both fixed and variable components
2) Carrying Costs: the costs of carrying the inventory
3) Sunk Costs: in the past and unavoidable
4) Committed Costs future but unavoidable

Question 16

1) Process Costing
2) Operating Costing
3) Activity Based Costing
4) Job Order Costing

Answer 16

1) Process Costing: accumulated by department rather than job
2) Operating Costing: is hybrid system that allows the company to use job order costing for some costs of production and process costing for other costs
3) Activity Based Costing: accumulates all cost overhead for each of the activities of the organization and then allocates those activity costs to the cost objects that caused activity
4) Job Order Costing: allocating production costs to products and services that are identifiable as separate units and require greater or lesser amounts of work to complete

Question 17

Activity Based Costing can be used in either

Answer 17

process costing and job costing. It assigns overhead and indirect costs to related products and services

Question 18

Activity Based Costing assigns costs to

Answer 18

activities or transactions and allocates them to products according to their use of each activity. This method means multiple cause and effect relationships may exist.

Question 19

Activity Based Costing tends to increase

Answer 19

both the number of cost pools and the number of allocation bases because ABC breaks down a production process into many activities. Then accumulates the cost by the activity (cost pool) using appropriate allocation base for each.

Question 20

Traditional cost would use

Answer 20

one cost and one allocation base (factory overhead)

Question 21

Activity based costing system cost reduction is accomplished by

Answer 21

eliminating non value adding activities because that will reduce cost. Don’t eliminate all cost drivers because that would eliminate all activity.

Question 22

Costs associated with activity based costing is high because

Answer 22

determining the amounts that go in which pools and their related costs will likely be more costly than traditional systems

Question 23

Joint Costs will most likely be allocated based upon

Answer 23

relative unit volume, relative sales value at split off, or net realizable value.

Question 24

Flexible budget amounts are not used to

Answer 24

to allocate joint costs

Question 25

Sales Value at split off is recognized method of

Answer 25

allocating joint costs

Question 26

Physical measures such as

Answer 26

weights or volume are recognized method of allocating joint costs

Question 27

Constant gross margin percentage net realizable value method is recognized method of

Answer 27

allocating joint costs

Question 28

1) Sales Price less the cost to complete
2) Sales Price at point of sale reduced by cost to complete is
3) Sales Price at point of sale reduced by cost to complete
4) Selling price less a normal profit margin

Answer 28

1) Sales Price less the cost to complete: is defined as the relative sales value at split off. In other words, this is the additional contribution to income generated by completing the product
2) Sales Price at point of sale reduced by cost to complete: is the additional contribution to income generated by completing the product. Its not equal to total costs
3) Sales Price at point of sale reduced by cost to complete: is the additional contribution to income generated by completing the product. Its not equal to joint costs (this is zero profit situation)
4) Selling price less a normal profit margin: is generally a cost figure. It is not equal to sales price less the cost to complete, which is the additional contribution to income generated by completing the product (this is zero profit situation)

Question 29

1) Units of electrical power consumed is a
2) Units sold
3) Salaries of service department
4) Direct materials

Answer 29

1) Units of electrical power consumed is a base that would be great indication of producing departments demand on the service department
2) Units sold is a base of allocation relates more to the sales department
3) Salaries of service department is not a base of allocation it’s a cost
4) Direct materials is not the best base for a service department because it doesn’t have a direct relationship to the service department

Question 30

Benefit management can expect from traditional costing includes

Answer 30

using a common department or factory wide measure of activity using direct labor hours to distribute manufacturing overhead to products

Question 31

Activity based costing refines

Answer 31

PRODUCT COST because the cost system emphasizes long term product analysis (when fixed costs become variable costs)

Question 32

1) Activity based costing
2) Job Costing is
3) Variable costing is
4) Process Costing is

Answer 32

1) Activity based costing: acceptable for internal reporting not external reporting
2) Job Costing: is acceptable for both internal reporting and external reporting
3) Variable costing: is acceptable for internal reporting not acceptable for external reporting
4) Process Costing: is acceptable for both internal reporting and external reporting

Question 33

Activity based costing collects

Answer 33

financial and operating data on the basis of the underlying nature and extent of the cost drivers

Question 34

Engineered Cost bears an observable and known

Answer 34

relationship to a quantifiable (measured) activity base

Question 35

Activity based costing products or services require the

Answer 35

performance of activities, and activities consume resources

Question 36

Activity based costing normally results in

Answer 36

substantially greater unit costs for low volume products than is reported by traditional product costing

Question 37

Activity based costing is recommended when

Answer 37

more than one product is produced and those products do not uniformly consume indirect resources

Question 38

Overhead costs are

Answer 38

employee salaries and employee benefit expense

Question 39

Behavioral effects, costs of measurement and degree of correlation are all factors that should be considered when

Answer 39

selecting appropriate cost drivers to apply for activity based costing

Question 40

Activity based costing is very beneficial for allocating

Answer 40

indirect costs when there are multiple activities that is evaluated independently and assigned to cost drivers which results in allocation rate unique to activity

Question 41

Value added costs are those resource uses that_________________

Examples of Nonvalue adding costs are _________________

Answer 41

Value added costs are those resource uses that provide value to the consumer

Examples of Nonvalue adding costs are moving and handling costs

Question 42

To encourage the use of nonfinancial measures you should

Answer 42

tie incentives to the managers individual effort

Question 43

Benchmarking is the process by which

Answer 43

products and services of a business entity are measured and evaluated relative to the best possible levels of performance

Question 44

Total productivity ratios (TPRs) consider

Answer 44

all inputs simultaneously as well as the prices of the inputs

Question 45

Benchmarking involves comparing a company’s

Answer 45

internal processes that need to be improved to those of external companies identified as best in class

Question 46

Benchmark compares and contrasts

Answer 46

its financial information to published information to determine optimal results (identifying standards)

Question 47

Control Chart quality programs normally include

Answer 47

a number of techniques to find and analyze problems used to determine zero defects and goalpost conformance

Question 48

1) Pareto diagram
2) Fishbone diagram
3) Kanban

Answer 48

1) Pareto diagram: is a quality control tool used to evaluate error rates and process improvement issues in a manner that combines both a histogram and a line graph
2) Fishbone diagram: analyzes cause and effect and does not display the relationship between errors and process issues contemplated by Pareto Diagram
3) Kanban: is Japanese for card and is used as a supply chain and inventory control mechanism

Question 49

Pareto diagram displays

Answer 49

the individual and cumulative frequency of quality issues, defects, or problems

Question 50

The elements of manufacturing process typically presented

Answer 50

on a cause and effect Fishbone are manpower, machinery, method and materials because it helps identify defects

Question 51

1) Cost SBU
2) Revenue SBU
3) Profit SBUs
4) Investment SBUs

Answer 51

1) Cost SBU: only have responsibility for one dimension of financial performance and it is one that they control entirely, the level of costs incurred.
2) Revenue SBU: represents a greater responsibility than cost SBUs. Managers of revenue SBU only have responsibility for one dimension of financial performance.
3) Profit SBUs: represent a greater responsibility than either cost or revenue SBU because managers maintain control of revenues and costs and the relationship between them
4) Investment SBUs: represent the organizational segment with the highest level of responsibility managers consider cost, revenue and their relationship between profits generated and assets invested

Question 52

A successful responsibility accounting reporting system is dependent upon

Answer 52

responsibility for costs, the authority to do something about them, are necessary for a successful responsibility accounting system

Question 53

Controllable Margin is computed as

Answer 53

contribution margin net of controllable costs. Controllable costs represent those fixed costs that managers can impact in less than one year

Question 54

Balanced Scorecard is

Answer 54

performance measurement tool generally associated with the display of information evaluating multiple dimensions of business outcomes

Question 55

The balance scorecard typically defines

Answer 55

organizational performance in four dimensions including innovation, customer satisfaction, internal business processes and finance

Question 56

1) Measurement of customer value
2) Measures of financial performance
3) Learning and innovation

Answer 56

1) Measurement of customer value: such as discount prices compared to competitors prices for a cost leader, would most likely be included in the customer section of the balanced scorecard
2) Measures of financial performance: would focus more on results of operations and utilization of assets
Internal business processes would focus more on internal efficiencies and cost structure than external comparisons to competitor pricing
3) Learning and innovation: would focus more on the effective use of personnel in improving business processes and linking rewards with recognition as opposed to external comparisons to competitor costs

Question 57

Financial and Non financial features of an organization that contribute to its success in achieving strategy are referred to as critical success factors and are normally classified as

Answer 57

1) Financial solvency and return 2) Customer Satisfaction 3) Internal business process 4) Human resource innovation

Question 58

Sales are reported on company financial statements and are often used as a measure of

Answer 58

financial performance

Question 59

Balance scorecard provides information on several aspects of an organizations performance capturing success factors such as

Answer 59

financial performance, internal business process, innovation/ hr advancements, and customer satisfaction

Question 60

1) Rework is an ____________
2) Maintenance is ______________
3) Inspection is a __________
4) Product recalls is an ________________

Answer 60

1) Rework is an internal failure cost
2) Maintenance is prevention cost
3) Inspection is a prevention cost
4) Product recalls is an external failure cost

Question 61

Appraisal costs would detect _______________________________ Examples of appraisal costs include: __________________________

Answer 61

Appraisal costs would detect individual products that do not conform to specifications. Examples of appraisal costs include: statistical quality checks, inspections, testing, maintenance of lab

Question 62

The four categories of cost associated with product quality are

Answer 62

1) Prevention 2) Appraisal 3) Internal Failure 4) External Failure

Question 63

External failure examples are_________________________
Internal failure example are____________________________

Answer 63

External failure examples are: lost customers, warranty costs, liability claims
Internal failure example are: tooling changes, rework, scrap

Question 64

Tracking the number of products reworked effectively measures

Answer 64

improvements in product quality when results of internal failure occurs

Question 65

Prevention costs

Answer 65

are redesign of processes

Question 66

Costs incurred in shortening product lead times and achieving on time deliveries are measures of

Answer 66

performance and not a cost of quality

Question 67

Employee satisfaction and retention measures are used under

Answer 67

“learning and growth”

Question 68

Total debt ratio:

Answer 68

Total assets

Question 69

Times interest earned

Answer 69

         Interest expense

Question 70

Return on sales

Answer 70

Income before interest income, interest
expense, and taxes
—————————————————————
Sales (net)

Question 71

Return on equity

Answer 71

Average total equity

Question 72

Return on assets

Answer 72

Average total assets

Question 73

Quick ratio

Answer 73

Cash and cash equivalents + Short-term marketable
securities + Receivables (net)
————————————————————————–
Current liabilities

Question 74

Profit Margin

Answer 74

Sales (net)

Question 75

Price earnings ratio

Answer 75

Basic earnings per share

Question 76

Operating cash flow ratio

Answer 76

Ending current liabilities

Question 77

Inventory turnover

Answer 77

Average inventory

Question 78

Gross margin
(Gross profit margin)

Answer 78

Sales (net)

Question 79

Equity multiplier

Answer 79

Total equity

Question 80

Dividend payout

Answer 80

Net income

Question 81

Debt to equity

Answer 81

Total equity

Question 82

Days sales in accounts receivable

Answer 82

Sales (net) / 365

Question 83

Days of payables
outstanding

Answer 83

Cost of goods sold / 365

Question 84

Days in inventory

Answer 84

Ending inventory
Cost of goods sold / 365

Question 85

Current ratio

Answer 85

Current liabilities

Question 86

Basic earnings per share

Answer 86

Weighted average common shares
outstanding

Question 87

Asset turnover

Answer 87

Average total assets

Question 88

Accounts receivable
turnover

Answer 88

Average accounts receivable (net)

Question 89

Traditional Overhead Rate

Answer 89

Budget manufacturing overhead costs
________________________________________
Estimated Cost Driver

Question 90

Cost of Goods Manufactured

Answer 90

Question 91

Cost of Goods Sold

Answer 91

Question 92

Equivalent Units and Total Cost Calculated using FIFO

Answer 92

(Beginning WIP x % to be completed) + Units started and completed + (Ending WIP x % completed)

Question 93

Equivalent Units and Total Cost Calculated using Weighted Average Method

Answer 93

Units completed and transferred out + (Ending WIP x % completed)

Question 94

ROI

Answer 94

1) Profit Margin: (Income / Sales)
2) Investment Turnover: (Sales/ assets)

Question 95

DuPont ROE Formula

Answer 95

Net Profit Margin x Asset Turnover x Financial Leverage
1) Net Profit Margin = Net Income/ Sales
2) Asset Turnover = Sales / Average Total Assets
3) Financial leverage = Average total assets/ Equity

Question 96

Residual Income

Answer 96

1) Net Income - Required Return
2) Net Book Value x Hurdle Rate = Required Return

Question 97

Required Return

Answer 97

Investment x Cost of Capital