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Question 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. Marblette Italian Marble

Purchase volume 20,000 1,000 Purchase cost per unit $50 $250 Shipments received 12 12 Hours used per shipment * 5 3 * These data were accumulated after a careful activity analysis.

Currently, In-Sync Fixtures uses a traditional costing system with indirect costs allocated using purchased cost of goods as a basis. In-Sync Fixtures is considering refining the allocation of its receiving costs of $40,000. It realizes that the Italian Marble is heavier and requires more care than the Marblette but that the Marblette comes in larger volume.

Which statement can be made using the results of the activity analysis performed by In-Sync Fixtures?

(Points : 3)

The use of this refined activity-based costing system will increase the accuracy of the resulting product costs because a more appropriate cost driver will be used as the allocation base. The traditional allocation method being used is causing product-cost cross-subsidization with the product line Marblette being undercosted. The cost allocated to the Italian Marble product line under the traditional system is more than the activity-based costing allocated cost. The use of this refined activity-based costing system will increase the accuracy of the resulting product costs becaues it probably will cost less to trace the costs to the product lines.

Question 2.2. (TCO 1) Building or plant security is an example of (Points : 3)

unit-level costs. batch-level costs. product-sustaining costs. facility-sustaining costs.

Question 3.3. (TCO 1) If products are alike, then for costing purposes (Points : 3)

a simple costing system will yield accurate cost numbers. an activity-based costing system should be used. multiple indirect-cost rates should be used. varying demands will be placed on resources.

Question 4.4. (TCO 1) Undercosting a particular product may result in (Points : 3)

loss of market share. lower profits. operating inefficiencies. understating total product costs.

Question 5.5. (TCO 1) The MOST likely example of an output unit-level cost is (Points : 3)

general administrative costs. paying suppliers for orders received. engineering costs. machine depreciation.

Question 6.6. (TCO 1) Unit-level cost drivers are most appropriate as an overhead assignment base when (Points : 3)

several complex products are manufactured. only one product is manufactured. direct labor costs are low. factories produce a mix of products.

Question 7.7. (TCO 1) A well-designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis (Points : 3)

can be used to eliminate non-value-added activities. is easy to analyze and interpret. takes the choices and judgment challenges away from the managers. emphasizes how managers can achieve higher sales.

Question 8.8. (TCO 1) The UNIQUE feature of an ABC system is the emphasis on (Points : 3)

costing individual jobs. department indirect-cost rates. multiple-cost pools. individual activities.

Question 9.9. (TCO 1) For service organizations that bill customers at a predetermined average rate, activity-based cost systems can help to (Points : 3)

clarify appropriate cost assignments for various service activities. identify the profitability of various service activities. Both A and B None of the above

Question 10.10. (TCO 1) Dalrymple 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? (Points : 3)

$0.50 $1.00 $1.50 $2.00

Question 1.1. (TCO 2) If initial budgets prove unacceptable, planners achieve the MOST benefit from (Points : 3)

planning again in light of feedback and current conditions. deciding not to budget this year. accepting an unbalanced budget. using last year's budget.

Question 2.2. (TCO 2) To gain the benefits of budgeting, ________ must understand and support the budget. (Points : 3)

customers management at all levels suppliers All of the above

Question 3.3. (TCO 2) Financial budgets include the (Points : 3)

administrative costs budget. capital expenditures budget. production budget. marketing costs budget.

Question 4.4. (TCO 2) Flexible budgets (Points : 3)

accommodate changes in the inflation rate. accommodate changes in activity levels. are used to evaluate capacity utilization. are static budgets that have been revised for changes in prices.

Question 5.5. (TCO 2) A variance is (Points : 3)

the difference between a budgeted amount and a standard amount. the gap between an actual result and a benchmark amount. the required number of inputs for one standard output. the difference between an actual result and a budgeted amount.

Question 6.6. (TCO 2) Which of the following statements is true about overhead cost variance analysis using activity-based costing? (Points : 3)

Overhead cost variances are calculated for output-unit level costs only. Overhead cost variances are calculated for variable manufacturing overhead costs only. A four-variance analysis can be conducted. Activity-based costing uses input measures for all activities, resulting in the inability to do flexible budgets needed for variance analysis.

Question 7.7. (TCO 2) Fixed overhead costs include (Points : 3)

the cost of sales commissions. property taxes paid on plant facilities. indirect materials. energy costs.

Question 8.8. (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 20X2 budget. In 20X2, the company would like to increase selling prices by 4%, and as a result expects a decrease in sales volume of 10%. All other operating expenses are expected to remain constant. Assume that COGS is a variable cost and that operating expenses are a fixed cost. What is budgeted cost of goods sold for 20X2? (Points : 3)

$189,000 $196,560 $218,400 $210,000

Question 9.9. (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, 20x2, through June 30, 20x3.

July 1, 20x2 June 30, 20x3 Raw material (note) 40,000 10,000 Work in process 8,000 8,000 Finished goods 30,000 5,000 (note) Three units of raw material are needed to produce each unit of finished product.

If Hester Company plans to sell 500,000 units during the 20x2-20x3 fiscal year, the number of units it would have to manufacture during the year would be

(Points : 3)

505,000. 500,000. 480,000. 475,000.

Question 10.10. (TCO 2) Information pertaining to Brenton Corporation's sales revenue is presented in the following table:

February March April

Cash Sales $160,000 $150,000 $120,000 Credit Sales 300,000 400,000 280,000 Total Sales $460,000 $550,000 $400,000

Management estimates that 5% of credit sales are not collectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Cost of purchases of inventory each month are 70% of the next month's projected total sales. ll purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase.

Brenton's budgeted total cash payments in March for inventory purchases are

(Points : 3)

$385,000. $358,750. $306,250. $280,000.