Acc310 Cost Accounting: Week 2 Quiz (10 MCQs) – Version 5

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Acc310 Cost Accounting
Week 2 Quiz (10 MCQs) – Version 5

1. Which of the following statements about the theory of constraints is (are) true?
(A) The theory of constraints focuses on determining the optimal product mix when one or more resources restrict the attainment of a goal or objective.
(B) The theory of constraints focuses on maximizing the rate of throughput contribution while minimizing investment and other operating costs. (Points : 1)
only A.
only B.
neither A nor B is true.
both A and B are true.

2. The theory of constraints focuses on maximizing throughput contribution margin while minimizing all of the following except (Points : 1)
fixed overhead costs.
Production bottlenecks.
investment in buildings.
investment in inventories.

3. The Cost Flow Diagram includes all of the following costs except: (Points : 1)
Selling expenses
Direct materials
Direct labor
Fixed manufacturing overhead
Variable manufacturing overhead

4. The Silver Company uses a predetermined overhead rate in applying overhead to production orders on a labor cost basis in Department A and on a machine hours basis in Department B. At the beginning of 2008, the company made the following estimates:
Dept. A Dept. B
Direct labor cost $60,000 $40,000
Factory overhead $90,000 $45,000
Direct labor hours 6,000 9,000
Machine hours 2,000 15,000

What predetermined overhead rate would be used in Department A and Department B respectively? (Points : 1)
150% and 300%.
150% and $3.00.
$1.50 and 300%.
$1.50 and $3.00.

5. Which of the following statements is (are) false regarding cost allocations and product costing?
(A) It is easier to determine the individual product cost for a manufacturer than it is for a wholesaler.
(B) In general, indirect costs are assigned, while direct costs are allocated. (Points : 1)
Only A is false
Only B is false.
Both A and B are false.
Neither A nor B is false.

6. Which of the following statements regarding special orders is (are) true?
(A) The primary decision for special orders is determining whether the differential revenue is greater than the differential costs associated with the order.
(B) The differential analysis approach to pricing for special orders could lead to underpricing in the long-run because fixed costs are not included in the analysis.
only A.
only B.
neither A nor B is false.
both A and B are true.

7. The Blade Division of Axe Company produces hardened steel blades. One-third of Blade's output is sold to the Forestry Products Division of Axe; the remainder is sold to outside customers. Blades' estimated operating profit for the year is:
Forestry Division Outside Customers
Sales $15,000 $40,000
Variable Costs (10,000) (20,000)
Fixed Costs (3,000)
Operating Profits $2,000 $14,000
Unit Sales 10,000 20,000

The Forestry Division has an opportunity to purchase 10,000 blades of the same quality from an outside supplier on a continuing basis. The Blade Division cannot sell any additional products to outside customers. Should the Axe Company allow its Forestry
Division to purchase the blades from the outside supplier at $1.25 per unit?
a. No; making the blades will save Axe $1,500.
b. Yes; buying the blades will save Axe $1,500.
c. No; making the blades will save Axe $2,500.
d. Yes; buying the blades will save Axe $2,500.

8. The UVW Manufacturing Company produces a single product in batches throughout the year. Which of the following product costing systems should be used by UVW?
job-order costing
process costing
operation costing
batch costing

9. Which of the following would be the least appropriate allocation base for allocating overhead in a highly automated (i.e., capital-intensive) manufacturing company?
electricity used
machine hours
direct labor hours
material consumed

10. The CJP Company produces 10,000 units of item S10 annually at a total cost of $190,000.
Direct materials $ 20,000
Direct labor 55,000
Variable overhead 45,000
Fixed overhead 70,000
Total $190,000

The XYZ Company has offered to supply 10,000 units of S10 per year for $18 per unit. If CJP accepts the offer, $4 per unit of the fixed overhead would be saved. In addition, some of CJP's facilities could be rented to a third party for $15,000 per year. What are the relevant costs for the "make" alternative?
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