mangament accounting

Management Accounting Synthesis2nd Semester 2013-2014

I. Management Accounting and Cost Concept

Financial and Managerial AccountingConsider the descriptors that follow.

1. Is heavily involved with the recordkeeping and reporting of assets, liabilities, and stockholders’ equity.2. Focuses on planning, control, decision making, and performance evaluation.3. Is heavily regulated.4. A field that is becoming more "cross-functional" in nature.5. Much of the field is based on costs and benefits.6. Is involved almost exclusively with past transactions and events.7. Much of the information provided is directed toward stockholders, financial analysts, creditors, and other

external parties.8. Tends to focus more on subunits within an entity rather than the organization as a whole.9. May become involved with measures of customer satisfaction, and the amount of actual cost incurred vs.

budgeted targets.Required:Determine whether the descriptors are most closely associated with financial accounting or managerial accounting.

MANAGERIAL ACCOUNTING VS. FINANCIAL ACCOUNTING Briefly distinguish between managerial accounting and financial accounting. Be sure to comment on the general focus, users, and regulation related to the two fields.

CROSS-FUNCTIONAL TEAMS AND TIME-BASED COMPETITIONCross-functional teams and time-based competition are two themes of contemporary management accounting. Briefly explain these two concepts.

Cost Concepts; Different Types of EntitiesConsider the three firms that follow: (1) Continental Airlines, (2) BMW, and (3) Target. These firms, examples of service providers, manufacturers, and merchandisers, tend to have different characteristics with respect to costs and financial-statement disclosures.Required:Determine which of the preceding firms (1, 2, and/or 3) would likely:A. Disclose operating expenses on the income statement.B. Have product costs.C. Have period costs.D. Disclose cost of cost good sold on the income statement.E. Have no meaningful investment in inventory.F. Maintain raw-material, work-in-process, and finished-goods inventories.G. Have variable and fixed costs.

Content of Financial Statements and Reports Consider the following cost items:

1. Sales commissions earned by a company's sales force.2. Raw materials purchased during the period.3. Current year's depreciation on a firm's manufacturing facilities.4. Year-end completed production of a carpet manufacturer.5. The cost of products sold to customers of an apparel store.6. Wages earned by machine operators in a manufacturing plant.7. Income taxes incurred by an airline.8. Marketing costs of an electronics manufacturer.9. Indirect labor costs incurred by a manufacturer of office equipment.

Required: A. Evaluate the costs just cited and determine whether the associated dollar amounts would be found on the

firm's balance sheet, income statement, or schedule of cost of goods manufactured.B. What major asset will normally be insignificant for service enterprises and relatively substantial for retailers,

wholesalers, and manufacturers? Briefly discuss. C. Briefly explain the similarity and difference between the merchandise inventory of a retailer and the finished-

goods inventory of a manufacturer.

Identification of Product Costs and Period Costs, Cost Behavior Eastside Manufacturing produces small electric engines. Identify the following costs as direct materials (DM), direct labor (DL), manufacturing overhead (MOH), or a period cost (PC). Also indicate whether the cost is variable (V) or fixed (F) with respect to behavior.

A. Commissions paid to salespeopleB. Straight-line depreciation on the factory buildingC. Salary of the plant supervisorD. Wages of the assembly-line workersE. Machine lubricant used in production activitiesF. Engine casings used in production activitiesG. Advertising placed in trade journalsH. Lease payments for the president's automobileI. Property taxes paid on the factory facilities

Identification of Product Costs and Period Costs, Cost BehaviorConsider the following items:

A. Tomatoes used in the manufacture of Heinz ketchupB. Administrative salaries of executives employed by Southwest AirlinesC. Wages of assembly-line workers at a Ford plantD. Marketing expenditures of the Los Angeles Dodgers baseball clubE. Commissions paid to Coca-Cola's salespeopleF. Straight-line depreciation on manufacturing equipment owned by Dell ComputerG. Shipping charges incurred by Office Depot on out-going ordersH. Speakers used in Sony home-theater systemsI. Insurance costs related to a Mary Kay Cosmetics' manufacturing plant

Required:Complete the table that follows and classify each of the costs listed as (1) a product or period cost and (2) a variable or fixed cost by placing an "X" in the appropriate column.

Answer: Product or Period Cost Variable or Fixed Cost

Item Product Period Variable FixedABCDEFGHI

Identification of Various Cost Concepts The following selected costs were extracted from the accounting records of Los Angeles Machining (LAM):

1. Direct materials used in production2. Wages of machine operators3. Factory utilities4. Sales commissions5. Salary of LAM's president6. Factory depreciation7. Wages of plant security guards8. Uncollectible accounts expense9. Machine lubricant used in production

Required:By the use of numbers, identify the costs that would be used to calculate:

A. cost of goods manufactured.B. manufacturing overhead.C. total period costs.D. total conversion costs.E. total direct costs of LAM's credit and collections department.F. LAM's inventory valuation.

Income-Related Computations Hampton Company had the following inventory balances at the beginning and end of the year:

January 1 December 31Raw material $ 50,000 $ 35,000Work in process 130,000 170,000Finished goods 280,000 255,000

During the year, the company purchased $100,000 of raw material and spent $340,000 on direct labor. Other data: manufacturing overhead incurred, $450,000; sales, $1,560,000; selling and administrative expenses, $90,000; income tax rate, 30%.

Required:A. Calculate cost of goods manufactured.B. Calculate cost of goods sold.C. Determine Hampton's net income.

Income and Financial-Schedule Calculations: Working BackwardsThe selected amounts that follow were taken from Kentucky Corporation's accounting records:

Raw material used $ 27,000Direct labor 35,000Total manufacturing costs 104,000Work-in-process inventory, 1/1 19,000Cost of goods manufactured 100,000Cost of goods available for sale 175,000Finished-goods inventory, 12/31 60,000Sales revenue 300,000Selling and administrative expenses 125,000Income tax expense 18,000

Required:Compute the following:A. Manufacturing overhead.B. Work-in-process inventory, 12/31.C. Finished-goods inventory, 1/1.D. Cost of goods sold.E. Gross margin.F. Net income.

Flow of Costs, Missing Values The Morton Company recorded the following transactions for February 20x1:

Materials Work in Process Finished GoodsPurchases $100,000Beginning inventory 18,000 $ 8,000 $ EEnding inventory A 20,000 30,000Direct materials used 90,000Direct labor BManufacturing overhead (includes indirect materials used

of $10,000) 115,000Transferred to finished goods CCost of goods sold D

Sales were $560,000, with sales prices determined by adding a 40% markup to the firm's manufacturing cost. The total cost of direct materials used, direct labor, and manufacturing overhead during the month was $285,000.

Required: Calculate the missing values.

Fixed and Variable Cost Behavior Mighty Muffler, Inc., operates an automobile service facility. The table below shows the cost incurred during a month when 600 mufflers were replaced.

Number of Muffler Replacements500 600 700

Total costs:Fixed costs A $ 8,400 CVariable costs B 6,000 D

Total costs E $14,400 F

Cost per muffler replacement:Fixed cost G H IVariable cost J K L

Total cost per muffler replacement M N O

Required: Fill in the missing amounts, labeled A through O, in the table.

Fixed and Variable Cost Behavior Global Systems began business on January 1 of the current year, producing a single product that is popular with

home builders. Demand was very strong, allowing the company to sell its entire manufacturing output of 80,000 units. The following unit costs were incurred:

Manufacturing costs:Direct materials $15Direct labor 8Variable overhead 11Fixed overhead 6

Selling and administrative costs:Variable 5Fixed 2

Global anticipates an increase in productive output to 100,000 units and sales of 95,000 units in the next accounting period. The company uses appropriate drivers to determine cost behavior and estimates.

Required:A. Assuming that present cost behavior patterns continue, compute the total expected costs in the upcoming

accounting period.B. George Levy is about to prepare a graph that shows the unit cost behavior for variable selling and

administrative cost. If the graph’s horizontal axis is volume and the vertical axis is dollars, briefly describe what George’s graph should look like.

C. Determine whether the following costs are variable or fixed in terms of behavior:1. Yearly lease payments for a state-of-the-art cutting machine.2. A fee paid to a consultant who provided advice about quality issues. The fee was based on the number

of consulting hours provided. 3. Cost of an awards dinner for "star" salespeople.

Elements of Financial Statements, Cost Behavior

KC Manufacturing, which began operations on January 1 of the current year, produces an industrial scraper that sells for $325 per unit. Information related to the current year's activities follows.

Number of scrapers produced 20,000Number of scrapers sold 17,000Variable costs per unit:

Direct materials $25Direct labor 35

Manufacturing overhead 60Annual fixed costs:

Manufacturing overhead $400,000Selling and administrative 140,000

KC carries its finished-goods inventory at the average unit cost of production. There was no work in process at year-end.

Required:A. Compute the company's average unit cost of production.B. Determine the cost of the December 31 finished-goods inventory.C. Compute the company's cost of goods sold. D. If next year's production increases to 23,000 units and general cost behavior patterns do not change, what is

the likely effect on:1. The direct-labor cost of $35 per unit? Why?2. The fixed manufacturing overhead cost of $400,000? Why?

Economic Characteristics of Costs

The following terms are used to describe various economic characteristics of costs:

Opportunity cost Differential costOut-of-pocket cost Marginal costSunk cost Average cost

Required:Choose one of the preceding terms to characterize each of the amounts described below. Each term may be used only once.

A. The cost of including one extra child in a day-care center.B. The cost of merchandise inventory purchased five years ago. The goods are now obsolete.C. The cost of feeding 300 children in a public school cafeteria is $450 per day, or $1.50 per child per day. What

economic term describes this $1.50 cost?D. The management of a high-rise office building uses 3,000 square feet of space in the building for its own

administrative functions. This space could be rented for $30,000. What economic term describes this $30,000 of lost rental revenue?

E. The cost of building an automated assembly line in a factory is $700,000; a manually operated assembly line would cost $250,000. What economic term is used to describe the $450,000 variation between these two amounts?

F. Refer to the preceding question and assume that the firm is currently building the assembly line for $700,000. What economic term is used to describe the $700,000 construction cost?

DISCUSSION QUESTIONSProduct Costs and Period Costs

Madison Corporation has a single facility that it uses for manufacturing, sales, and administrative activities. Should the company's building depreciation charge be expensed in its entirety or is a different accounting procedure appropriate? Explain.

Product Costs and Period Costs, Cost Flows

Manufacturers have established a cost classification called product costs. Define the term "product cost" and note where these costs appear in the financial statements. Be specific.

Financial Statements of Service, Retailing, and Manufacturing Firms

The income statements and balance sheets of service, retailing, and manufacturing businesses tend to differ.

Required:A. Which of these businesses will disclose a cost-of-goods-sold figure on the income statement? Why?B. Briefly describe the difference between a retailing firm and manufacturer's disclosure of inventories on the

balance sheet.

Definition of Cost Terms

Briefly define and discuss the terms in each of the pairs that follow.A. Direct and indirect costsB. Direct materials and indirect materialsC. Manufacturing overhead and direct labor

Behavior of Fixed and Variable Costs

In discussing the operation of his automobile, a doctor once observed that gasoline is a fixed cost because the cost per gallon is relatively stable. Insurance, on the other hand, is a variable cost because the cost per mile varies inversely with the number of miles driven. Comment on the doctor's observation.

Economic Characteristics of Costs, Relevance for Decisions

Describe the economic characteristics of sunk costs and opportunity costs, and explain the impact that these costs may have on decisions.

Selected CMA Questions

Question 1 - CMA 678 4-12 - Classifications of CostsControllable costs are those thatA. Are governed mainly by past decisions that established the present levels of operating and organizational capacity and that only change slowly in response to small changes in capacity.B. Are likely to respond to the amount of attention devoted to them by a specified manager.C. Management decides to incur in the current period to enable the company to achieve objectives other than the filling of orders placed by customers.D. Will be unaffected by current managerial decisions.

Question 2 - CMA 685 5-1 - Classifications of CostsA cost that always can be physically traced to a cost object isA. A variable cost.B. A conversion cost.C. An indirect cost.D. A prime cost.

Question 3 - CMA 689 4-10 - Classifications of CostsHitchcock Industries has developed two new products but has only enough plant capacity to introduce one of these products this year. The company controller has gathered the following data to assist management in deciding which product should be selected for production.Hitchcock's fixed overhead includes proportional rent and utilities, machinery depreciation, and supervisory salaries.Selling and administrative expenses are not allocated to products.

Cost per unit: Power Drill Power SawRaw materials $22.00 $18.00Machining at $12/hr. 9.00 7.50Assembly at $10/hr. 15.00 5.00Variable O/H at $8/hr. 18.00 9.00Fixed O/H at $4/hr. 9.00 4.50Total unit cost: $73.00 $44.00Suggested selling price $88.98 $49.95Actual research and development costs $180,000 $95,000Proposed advertising and promotion costs $300,000 $250,000

The total overhead cost of $13.50 for Hitchcock's power saw is aA. Committed cost.B. Carrying cost.C. Sunk cost.D. Mixed cost.

Question 4 - CMA 1295 3-22 - Classifications of CostsMadtack Company's beginning and ending inventories for the month of November are:

November 1 November 30Direct materials $67,000 $62,000Work-in-process 145,000 171,000Finished goods 85,000 78,000Production data for the month of November:

Direct labor $200,000Actual factory overhead 132,000Direct materials purchased 163,000Transportation in 4,000Purchase returns and allowances 2,000

Madtack uses one factory overhead control account and charges factory overhead to production at 70% of directlabor cost. The company does not formally recognize over/underapplied overhead until year-end.Madtack Company's cost of goods sold for November isA. $502,000B. $491,000C. $476,000D. $484,000

Question 5 - CIA 1193 IV-1 - Classifications of CostsMany companies recognize three major categories of costs of manufacturing a product. These are direct materials, direct labor, and overhead. Which of the following is an overhead cost in the production of an automobile?A. The cost of small tools used in mounting tires on each automobile.B. The delivery costs for the tires on each automobile.C. The cost of the laborers who place tires on each automobile.D. The cost of the tires on each automobile.

Question 6 - CMA 685 5-6 - Classifications of CostsA cost incurred for the benefit of more than one cost object isA. A variable cost.B. A common cost.C. A conversion cost.D. A prime cost.




Madtack uses one factory overhead control account and charges factory overhead to production at 70% of direct labor cost. The company does not formally recognize over/underapplied overhead until year-end. Madtack Company's total manufacturing cost for November isA. $503,000B. $363,000C. $502,000D. $510,000

Question 8 - CMA 689 4-11 - Classifications of CostsHitchcock Industries has developed two new products but has only enough plant capacity to introduce one of these products this year. The company controller has gathered the following data to assist management in deciding which product should be selected for production. Hitchcock's fixed overhead includes proportional rent and utilities, machinery depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to products.

Cost per unit: Power Drill Power SawRaw materials $22.00 $18.00Machining at $12/hr. 9.00 7.50Assembly at $10/hr. 15.00 5.00

Variable O/H at $8/hr. 18.00 9.00Fixed O/H at $4/hr. 9.00 4.50Total unit cost: $73.00 $44.00Suggested selling price $88.98 $49.95Actual research and development costs $180,000 $95,000Proposed advertising and promotion costs $300,000 $250,000

Research and development costs for Hitchcock's two new products areA. Sunk costs.B. Opportunity costs.C. Conversion costs.D. Relevant costs.

Question 9 - CMA 1295 3-27 - Classifications of CostsA cost that bears an observable and known relationship to a quantifiable activity base is a(n)A. Engineered cost.B. Sunk cost.C. Indirect cost.D. Target cost.

Question 10 - CIA 1190 IV-5 - Classifications of CostsIn a traditional manufacturing operation, direct costs would normally includeA. Machine repairs in an automobile factory.B. Commissions paid to sales personnel.C. Electricity in an electronics plant.D. Wood in a furniture factory.

Question 11 - IMA 08-P2-104 - Classifications of CostsThe marketing manager of Ames Company has learned the following about a new product that is being introduced by Ames. Sales of this product are planned at $100,000 for the first year. Sales commission expense is budgeted at8% of sales plus the marketing manager's incentive budgeted at an additional 1/2%. The preparation of a product brochure will require 20 hours of marketing salaried staff time at an average rate of $100 per hour, and 10 hours, at $150 per hour, for an outside illustrator's effort. The variable marketing cost for this new product will beA. $8,500B. $10,500C. $8,000D. $10,000

Question 12 - CMA 693 3-4 - Classifications of CostsA fixed cost that would be considered a direct cost isA. A cost accountant's salary when the cost object is a unit of product.B. A production supervisor's salary when the cost object is the Production Department.C. Board of directors' fees when the cost object is the Marketing Department.D. The rental cost of a warehouse to store inventory when the cost object is the Purchasing Department.

Question 13 - CMA 696 3-29 - Classifications of CostsLucy Sportswear manufactures a specialty line of T-shirts using a job-order cost system. During March, the following costs were incurred in completing Job ICU2: direct materials, $13,700; direct labor, $4,800; administrative, $1,400; and selling, $5,600. Factory overhead was applied at the rate of $25 per machine hour, and Job ICU2 required 800 machine hours. If Job ICU2 resulted in 7,000 good shirts, the cost of goods sold per unit would beA. $6.50B. $6.30C. $5.70D. $5.50

Question 14 - CMA 689 4-13 - Classifications of CostsHitchcock Industries has developed two new products but has only enough plant capacity to introduce one of these products this year. The company controller has gathered the following data to assist management in deciding which product should be selected for production. Hitchcock's fixed overhead includes proportional rent and utilities, machinery depreciation, and supervisory salaries.Selling and administrative expenses are not allocated to products.

Cost per unit: Power Drill Power SawRaw materials $22.00 $18.00

Machining at $12/hr. 9.00 7.50Assembly at $10/hr. 15.00 5.00Variable O/H at $8/hr. 18.00 9.00Fixed O/H at $4/hr. 9.00 4.50Total unit cost: $73.00 $44.00Suggested selling price $88.98 $49.95Actual research and development costs $180,000 $95,000Proposed advertising and promotion costs $300,000 $250,000

The costs included in Hitchcock's fixed overhead areA. Prime costs.B. Discretionary costs.C. Committed costs.D. Sunk costs.

Question 15 - CMA 678 4-11 - Classifications of CostsDiscretionary costs areA. Likely to respond to the amount of attention devoted to them by a specified manager.B. Those management decides to incur in the current period to enable the company to achieve objectives other than the filling of orders placed by customers.C. Unaffected by current managerial decisions.D. Governed mainly by past decisions that established the current levels of operating and organizational capacity and that only change slowly in response to small changes in capacity.

Question 16 - CMA 691 3-3 - Classifications of CostsAdams Manufacturing, Inc. produces farm tractors. The details of its budgeted cost of goods manufactured schedule should come from which of the following schedules?A. Direct materials used, direct labor, manufacturing overhead, and the change in work-in-process.B. Purchases, raw material, work-in-process, and finished goods.C. Cost of goods sold plus or minus the change planned in finished goods.D. Purchases, direct labor, manufacturing overhead, finished goods, and work-in-process.


November 1 November 30Direct materials $67,000 $62,000Work-in-process 145,000 171,000Finished goods 85,000 78,000Production data for the month of November:Direct labor $200,000Actual factory overhead 132,000Direct materials purchased 163,000Transportation in 4,000Purchase returns and allowances 2,000

Madtack uses one factory overhead control account and charges factory overhead to production at 70% of direct labor cost. The company does not formally recognize over/underapplied overhead until year-end. Madtack Company's prime cost for November isA. $170,000B. $363,000C. $370,000D. $168,000

Question 18 - CMA 1282 4-101 - Classifications of CostsWhich of the following is the best example of a variable cost?A. Interest charges.B. The corporate president's salary.C. Property taxes.D. Cost of raw materials.

Question 19 - CMA 1277 5-5 - Classifications of CostsAn imputed cost isA. The difference in total costs which results from selecting one alternative instead of another.B. A cost that does not entail any dollar outlay but is relevant to the decision-making process.

C. A cost that continues to be incurred even though there is no activity.D. A cost that cannot be avoided because it has already been incurred.Question 20 - CMA 689 4-12 - Classifications of CostsHitchcock Industries has developed two new products but has only enough plant capacity to introduce one of these products this year. The company controller has gathered the following data to assist management in deciding which product should be selected for production. Hitchcock's fixed overhead includes proportional rent and utilities, machinery depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to products.

Cost per unit: Power Drill Power SawRaw materials $22.00 $18.00Machining at $12/hr. 9.00 7.50Assembly at $10/hr. 15.00 5.00Variable O/H at $8/hr. 18.00 9.00Fixed O/H at $4/hr. 9.00 4.50Total unit cost: $73.00 $44.00Suggested selling price $88.98 $49.95Actual research and development costs $180,000 $95,000Proposed advertising and promotion costs $300,000 $250,000

The advertising and promotion costs for the product selected by Hitchcock will beA. Discretionary costs.B. Committed costs.C. Mixed costs.D. Opportunity costs.

Question 21 - CMA 696 3-19 - Classifications of CostsIf the beginning balance for May of the materials inventory account was $27,500, the ending balance for May is $28,750, and $128,900 of materials were used during the month, the materials purchased during the month costA. $130,150B. $127,650C. $157,650D. $101,400

Question 22 - CMA 678 4-6 - Classifications of CostsConversion costs areA. Manufacturing costs incurred to produce units of output.B. All costs associated with manufacturing other than direct labor costs and raw material costs.C. The sum of direct labor costs and all factory overhead costs.

Question 23 - CMA 1292 H3 - Classifications of CostsThe information contained in a cost of goods manufactured budget most directly relates to theA. Materials used, direct labor, overhead applied, and ending work-in-process budgets.B. Materials used, direct labor, overhead applied, and finished goods inventories budgets.C. Materials used, direct labor, overhead applied, work-in-process inventories, and finished goods inventories budgets.D. Materials used, direct labor, overhead applied, and work-in-process inventories budgets.

Question 24 - CMA 1296 3-3 - Classifications of CostsConversion cost pricingA. Places minimal emphasis on the cost of materials used in manufacturing a product.B. Places heavy emphasis on direct costs and disregards consideration of indirect costs.C. Could be used when the customer furnishes the material used in manufacturing a product.D. Places heavy emphasis on indirect costs and disregards consideration of direct costs.

Question 25 - CMA 678 4-9 - Classifications of CostsVariable costs are all costsA. That do not change in total for a given period and relevant range but become progressively smaller on a per unit basis as volume increases.B. Of manufacturing incurred to produce units of output.C. That are associated with marketing, shipping, warehousing, and billing activities.D. That fluctuate in total in response to small changes in the rate of utilization of capacity.

Question 26 - CMA 697 3-2 - Classifications of CostsWhich one of the following is correct regarding a relevant range?A. Actual fixed costs usually fall outside the relevant range.

B. The relevant range cannot be changed after being established.C. Total variable costs will not change.D. Total fixed costs will not change.




Madtack uses one factory overhead control account and charges factory overhead to production at 70% of direct labor cost. The company does not formally recognize over/underapplied overhead until year-end. Madtack Company's cost of goods transferred to finished goods inventory for November isA. $469,000B. $484,000C. $495,000D. $477,000

Question 28 - CMA 678 4-7 - Classifications of CostsThe term prime costs refers toA. All costs associated with manufacturing other than direct labor costs and raw materials costs.B. The sum of direct labor costs and all factory overhead costs.C. The sum of raw materials costs and direct labor costs.D. Costs that are predetermined and should be attained.

Question 29 - CMA 678 4-10 - Classifications of CostsCommitted costs areA. Those management decides to incur in the current period to enable the company to achieve objectives other than the filling of orders placed by customers.B. Those that fluctuate in total in response to small changes in the rate of use of capacity.C. Governed mainly by past decisions that established the current levels of operating and organizational capacity and that only change slowly in response to small changes in capacity.D. Likely to respond to the amount of attention devoted to them by a specified manager.

[1] Gleim #: 3.2.48 -- Source: PublisherThe sum of the costs necessary to effect a one-unit increase in the activity level is a(n)A. Differential cost.B. Marginal cost.C. Incremental cost.D. Opportunity cost

[2] Gleim #: 3.1.6 -- Source: CMA 1296 3-3Conversion cost pricingA. Could be used when the customer furnishes the material used in manufacturing a product.B. Places minimal emphasis on the cost of materials used in manufacturing a product.C. Places heavy emphasis on direct costs and disregards consideration of indirect costs.D. Places heavy emphasis on indirect costs and disregards consideration of direct costs.

[6] Gleim #: 5.3.76 -- Source: CMA 1296 3-19Generally, individual departmental rates rather than a plantwide rate for applying manufacturing overhead are used ifManufacturing overhead is the largest cost component A. of its product cost.B. A company’s manufacturing operations are all highly automated.C. The manufactured products differ in the resources consumed from the individual departments in the plant.D. A company wants to adopt a standard cost system.

[7] Gleim #: 4.3.62 -- Source: CIA 596 III-99A company with three products classifies its costs as belonging to five functions: design, production, marketing, distribution, and customer services. For pricing purposes, all company costs are assigned to the three products. The direct costs of each of the five functions are traced directly to the three products. The indirect costs of each of the five business functions are collected into five separate cost pools and then assigned to the three products using appropriate allocation bases. The allocation base that will most likely be the best for allocating the indirect costs of the distribution function isA. Dollar sales volume.B. Number of sales persons.C. Number of shipments.D. Number of customer phone calls.

[9] Gleim #: 3.2.57 -- Source: CMA 0408 2-085Taylor Company is determining the cost behavior of several items in order to budget for the upcoming year. Past trends have indicated the following dollars were spent at three different levels of output:

Unit Levels10,000 12,000 15,000

Cost A $25,000 $29,000 $35,000Cost B 10,000 15,000 15,000Cost C 15,000 18,000 22,500

In establishing a budget for 14,000 units, Taylor should treat Costs A, B, and C, respectively, asSemivariable, A. fixed, and variable.B. Variable, semivariable, and semivariable.C. Semivariable, semivariable, and semivariable.D. Variable, fixed, and variable.

[12] Gleim #: 3.4.118 -- Source: CMA 1273 4-1Which of the following statements is true for a firm that uses variable costing?A. Profits fluctuate with sales.B. An idle facility variation is calculated.C. Product costs include variable administrative costs.D. The cost of a unit of product changes because of changes in number of units manufactured.

[13] Gleim #: 3.2.62 -- Source: CMA 0408 2-091Cell Company has discovered that the cost of processing customer invoices is strictly variable within the relevant range.Which one of the following statements concerning the cost of processing customer invoices is incorrect?A. The cost of processing the 100th customer invoice will be the same as the cost of processing the first customer invoice.B. The total cost of processing customer invoices will increase as the volume of customer invoices increases.C. The average cost per unit for processing a customer invoice will equal the incremental cost of processing one more customer invoice.D. The cost per unit for processing customer invoices will decline as the volume of customer invoices increases.

[15] Gleim #: 3.1.25 -- Source: CIA 593 IV-3A manufacturing firm produces multiple families of products requiring various combinations of different types of parts. The manufacturer has identified various cost pools, one of which consists of materials handling costs. This cost pool includes the wages and employee benefits of the workers involved in receiving materials, inspecting materials, storing materials in inventory, and moving materials to the workstations; depreciation and maintenance of materials handling equipment (e.g., forklift trucks); and costs of supplies used as well as other related costs. Of the following, the most appropriate cost driver for assigning materials handling costs to the various products most likely isA. Number of parts used.B. Number of vendors involved.C. Direct labor hours.D. Number of units produced.

[Fact Pattern #7]Wilcox Industrial has two support departments, the Information Systems Department and the Personnel Department, and two manufacturing departments, the Machining Department and the Assembly Department. The support departments service each other as well as the two production departments. Company studies have shown that the Personnel Department provides support to a greater number of departments than the Information Systems Department.

[17] Gleim #: 5.4.138 -- Source: CMA 0408 2-164 (Refers to Fact Pattern #7)

If Wilcox uses the direct method of departmental allocation, which one of the following cost allocations would occur? A. Some of the costs of the Personnel Department would be allocated to the Information Systems Department.B. Assembly Department would be allocated to the Machining Department.C. Information Systems Department would be allocated to the Assembly Department.D. Machining Department would be allocated to the Information Systems Department.

[19] Gleim #: 6.2.19 -- Source: CIA 1193 IV-25A company uses a planning system that focuses first on the amount and timing of finished goods demanded and thendetermines the derived demand for raw materials, components, and subassemblies at each of the prior stages of production.This system isA. Just-in-time purchasing.B. Materials requirements planning.C. An economic order quantity model.D. Linear programming

[21] Gleim #: 3.1.24 -- Source: CIA 1193 IV-5A company experienced a machinery breakdown on one of its production lines. As a consequence of the breakdown, manufacturing fell behind schedule, and a decision was made to schedule overtime to return manufacturing to schedule.Which one of the following methods is the proper way to account for the overtime paid to the direct laborers?A. The overtime hours times the overtime premium would be charged to repair and maintenance expense, and the overtime hours times the straight-time wages would be treated as direct labor.B. The overtime hours times the sum of the straight-time wages and overtime premium would be charged entirely to manufacturing overhead.C. The overtime hours times the sum of the straight-time wages and overtime premium would be treated as direct labor.D. The overtime hours times the overtime premium would be charged to manufacturing overhead, and the overtime hours times the straight-time wages would be treated as direct labor.

[24] Gleim #: 3.3.100 -- Source: CMA 694 3-8Committed costs are costs thatA. Were capitalized and amortized in prior periods.B. Result from a clear measurable relationship between inputs and outputs.C. Establish the current level of operating capacity and cannot be altered in the short run.D. Management decides to incur in the current period that do not have a clear cause and effect relationship between inputs and outputs.

[25] Gleim #: 6.5.49 -- Source: PublisherA systematic approach to reaching targeted cost levels during value chain analysis is known asA. Activity analysis.B. Value engineering.C. Life-cycle costing.D. Process value analysis.

[26] Gleim #: 5.1.5 -- Source: CMA 697 3-10Which one of the following statements is true regarding absorption costing and variable costing?A. Overhead costs are treated in the same manner under both costing methods.B. If finished goods inventory increases, absorption costing results in higher income.C. Gross margins are the same under both costing methods.D. Variable manufacturing costs are lower under variable costing.

[27] Gleim #: 3.1.1 -- Source: CMA 692 3-5The terms direct cost and indirect cost are commonly used in accounting. A particular cost might be considered a direct cost of a manufacturing department but an indirect cost of the product produced in the manufacturing department. Classifying a cost as either direct or indirect depends uponA. The behavior of the cost in response to volume changes.B. Whether the cost is expensed in the period in which it is incurred.C. Whether an expenditure is unavoidable because it cannot be changed regardless of any action taken.D. The cost object to which the cost is being related.

[28] Gleim #: 6.3.37 -- Source: PublisherThe process model used in a theory of constraints (TOC) analysis is calledA. Drum-buffer-rope.

B. Just-in-time.C. Materials requirements planning.D. Lean production.

[29] Gleim #: 5.3.105 -- Source: CMA 0408 2-148The most important criterion in accurate cost allocations isA. Using homogeneous cost pools.B. Using a simple allocation method.C. Allocating fixed and variable costs by using the same allocation base.D. Using multiple drivers for each cost pool.

[31] Gleim #: 3.4.124 -- Source: CIA 577 IV-3Joint costs are useful forA. Setting the selling price of a product.B. Determining inventory cost for accounting purposes.C. Evaluating management by means of a responsibility reporting system.D. Determining whether to continue producing an item.

[36] Gleim #: 5.1.48 -- Source: CMA 0408 2-116Dawn Company has significant fixed overhead costs in the manufacturing of its sole product, auto mufflers. For internalreporting purposes, in which one of the following situations would ending finished goods inventory be higher under direct(variable) costing rather than under absorption costing?A. If more units were produced than were sold during a given year.B. None of these situations.C. If more units were sold than were produced during a given year.D. In all cases when ending finished goods inventory exists.

[38] Gleim #: 5.2.68 -- Source: CMA 0408 2-118The distinction between joint products and by-products is largely dependent onA. Prime costs.B. Salvage value.C. Market value.D. Historical costs.

[44] Gleim #: 3.1.36 -- Source: CMA 0408 2-084Finley Painters Co., a painting contractor, maintains a job-order cost system. Job costs are accumulated by tracking the actual cost of paint and other materials used on each job, as well as the actual cost of wages earned by the painters on each job. In addition, overhead is applied to each job by using a predetermined rate based on the actual painters’ wages. Leonard Wayne, painter, earned $168 today by working on Job 08-45. In computing prime cost and conversion cost for Job 08-45, how would the wages earned today by Wayne be classified?A. As a component of conversion cost but not as a component of prime cost.B. As a component of both prime and conversion cost.C. As a component of prime cost but not as a component of conversion cost.D. As a component of neither prime cost nor conversion cost.

[46] Gleim #: 4.3.75 -- Source: CMA 1293 3-15Multiple or departmental overhead rates are considered preferable to a single or plantwide overhead rate whenA. Individual cost drivers cannot accurately be determined with respect to cause-and-effect relationships.B. Manufacturing is limited to a single product flowing through identical departments in a fixed sequence.C. Various products are manufactured that do not pass through the same departments or use the same manufacturing techniques.D. Cost drivers, such as direct labor, are the same over all processes.

[48] Gleim #: 5.4.131 -- Source: CMA 0408 2-153When allocating costs from one department to another, a dual-rate cost-allocation method may be used. The dual-rate cost allocation method is most useful whenA. Two or more A. products are produced.B. Two or more cost pools are to be allocated.C. Costs are separated into variable-cost and fixed-cost subpools.D. Two or more departments’ costs are to be allocated.

[51] Gleim #: 3.4.109 -- Source: CMA 1295 3-15

Because this allocation method recognizes that service departments often provide each other with interdepartmental service,it is theoretically considered to be the most accurate method for allocating service department costs to production departments. This method is theA. Linear method.B. Reciprocal method.C. Direct method.D. Variable method.

[52] Gleim #: 3.4.122 -- Source: CMA 1291 3-11A difference between standard costs used for cost control and budgeted costsA. Cannot exist because they should be the same amounts.B. Can exist because standard costs represent what costs should be, whereas budgeted costs represent expected actual costs.C. Can exist because budgeted costs are historical costs, whereas standard costs are based on engineering studies.D. Can exist because standard costs must be determined after the budget is completed.

[54] Gleim #: 4.3.82 -- Source: CMA 0408 2-140All of the following are likely to be used as a cost allocation base in activity-based costing except theA. Number of different materials used to A. manufacture the product.B. Number of vendors supplying the materials used to manufacture the product.C. Units of materials used to manufacture the product.D. Cost of materials used to manufacture the product.

[57] Gleim #: 6.1.11 -- Source: PublisherA firm that is deploying just-in-time manufacturing for the first time willA. Maintain a carefully calibrated safety stock since interruptions in supply are inevitable.B. Establish contracts with a few carefully chosen suppliers since an interruption in supply is extremely disruptive of the production process.C. Acquire considerable computer processing capability to manage the demands of the data-dependent kanban inventory management system.D. Establish contracts with many suppliers since an interruption in supply is extremely disruptive of the production process.

[61] Gleim #: 6.1.12 -- Source: PublisherWhich of the following is not a benefit of lean production?A. Reduced setup time.B. Improved on-time delivery.C. Lower central support costs.D. Lower training costs.

[62] Gleim #: 3.1.37 -- Source: CMA 0408 2-089Indirect and common costs often make up a significant portion of the cost of a product. All of the following are reasons forindirect cost allocation to cost objects except toA. Reduce total costs identified with products.B. Provide information for economic decision making.C. Justify costs for reimbursement purposes.D. Measure income and assets for external reporting purposes.

[64] Gleim #: 3.2.52 -- Source: CMA 0205 2-17Parker Company pays each member of its sales staff a salary as well as a commission on each unit sold. For the coming year,Parker plans to increase all salaries by 5% and to keep unchanged the commission paid on each unit sold. Because of increased demand, Parker expects the volume of sales to increase by 10%. How will the total cost of sales salaries and commissions change for the coming year?A. Increase by 5% or less.B. Increase by 10%.C. Increase by more than 10%.D. Increase by more than 5% but less than 10%.

[65] Gleim #: 3.2.60 -- Source: CMA 0408 2-088

Roberta Johnson is the manager of SleepWell Inn, one of a chain of motels located throughout the United States. An example of an operating cost at SleepWell that is semivariable isA. Local yellow pages advertising.B. The security guard’s salary.C. Postage for reservation confirmations.D. Electricity.

[75] Gleim #: 5.3.97 -- Source: PublisherWhich concept of capacity applies the least amount of overhead to units of production?A. Minimum volume.B. Theoretical capacity.C. Normal volume.D. Practical capacity.

[77] Gleim #: 5.4.124 -- Source: CMA 1295 3-16When allocating service department costs to production departments, the method that does not consider different costbehavior patterns is theA. Single-rate method.B. Reciprocal method.C. Step method.D. Direct method.

[79] Gleim #: 5.3.94 -- Source: PublisherThe numerator of the overhead application rate equalsA. Actual overhead costs.B. The actual activity level.C. Estimated overhead costs.D. The estimated activity level.

[81] Gleim #: 3.3.74 -- Source: CMA Sample Q3-6When compared with normal spoilage, abnormal spoilageA. Arises more frequently from factors that are inherent in the manufacturing process.B. Is given the same accounting treatment as normal spoilage.C. Is generally thought to be more controllable by production management than normal spoilage.D. Is not typically influenced by the “tightness” of production standards.

[82] Gleim #: 3.4.107 -- Source: CMA 1290 3-12Which one of the following considers the impact of fixed overhead costs?A. Direct costing.B. Marginal costing.C. Variable costing.D. Full absorption costing.

[83] Gleim #: 3.3.70 -- Source: CMA 1292 3-4In joint-product costing and analysis, which one of the following costs is relevant when deciding the point at which a product should be sold to maximize profits?A. Sales salaries for the period when the units were produced.B. Joint costs to the split-off point.C. Purchase costs of the materials required for the joint products.D. Separable costs after the split-off point.

[84] Gleim #: 5.3.98 -- Source: PublisherAnnual overhead application rates are used toA. Budget overhead.B. Treat overhead as period costs.C. Simulate seasonal variability of activity levels.D. Smooth seasonal variability of overhead costs.

[85] Gleim #: 5.4.128 -- Source: PublisherWhen allocating service and administrative costs, the least useful criterion as a basis for allocation isA. Ability to bear.B. Cause.

C. Fairness.D. Benefit.

[87] Gleim #: 3.2.55 -- Source: CMA 693 3-4A fixed cost that would be considered a direct cost isA. A production supervisor’s salary when the cost objective is the Production Department.B. The rental cost of a warehouse to store inventory when the cost objective is the Purchasing Department.C. A cost accountant’s salary when the cost objective is a unit of product.D. Board of directors’ fees when the cost objective is the Marketing Department.

[89] Gleim #: 6.6.62 -- Source: CMA 1295 3-14The cost of statistical quality control in a product quality cost system is categorized as a(n)A. Internal failure cost.B. External failure cost.C. Training cost.D. Appraisal cost.

[90] Gleim #: 3.3.66 -- Source: CMA 678 4-10“Committed costs” areA. Costs which are governed mainly by past decisions that established the present levels of operating and organizational capacity and which only change slowly in response to small changes in capacity.B. Costs which management decides to incur in the current period to enable the company to achieve objectives other than the filling of orders placed by customers.C. Amortization of costs which were capitalized in previous periods.D. Costs which are likely to respond to the amount of attention devoted to them by a specified manager.

mangament accounting

Documents