Cost Management A Strategic Emphasis Edward Blocher 8th Edition- Test Bank

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Cost Management A Strategic Emphasis Edward Blocher 8th Edition- Test Bank

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Chapter 2   Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map

 

1) In SWOT analysis, strengths and weaknesses are most easily identified by looking:

1. A) At the firm as a potential customer.
2. B) Inside the firm at its specific resources.
3. C) At the firm’s competition.
4. D) At the firm’s product.
5. E) Outside the firm from a consultant’s perspective.

 

Answer:  B

Difficulty: 1 Easy

Topic:  Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis

Learning Objective:  02-01 Explain how to implement a competitive strategy by using strengths-weaknesses-opportunities-threats (SWOT) analysis.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

 

2) In SWOT analysis, opportunities and threats are identified by:

1. A) Consultation with middle management.
2. B) Talking with the rank and file workers.
3. C) Looking outside the firm.
4. D) Brainstorming techniques.
5. E) Reviewing our corporate strategy.

 

Answer:  C

Difficulty: 1 Easy

Topic:  Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis

Learning Objective:  02-01 Explain how to implement a competitive strategy by using strengths-weaknesses-opportunities-threats (SWOT) analysis.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

 

 

3) Which of the following does notrepresent a possible opportunity for a manufacturing firm as a part of SWOT analysis?

1. A) Demographic trends.
2. B) Technological advances in the industry.
3. C) A patent developed by another firm for manufacturing a product.
4. D) Changes in regulation of the industry.
5. E) Changes in the economic environment facing all industries.

 

Answer:  C

Difficulty: 2 Medium

Topic:  Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis

Learning Objective:  02-01 Explain how to implement a competitive strategy by using strengths-weaknesses-opportunities-threats (SWOT) analysis.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

 

4) The balanced scorecard:

1. A) Is not comprehensive, since it doesn’t include all the critical success factors which contribute to competitive success.
2. B) Helps focus managers’ attention to bottom line profits.
3. C) Is forward looking, stressing nonfinancial measures that can lead to benefits in the future.
4. D) Fails to reflect environmental and social effects of the firm’s operations.
5. E) Is heavily weighted toward the financial critical success factors.

 

Answer:  C

Difficulty: 2 Medium

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-04 Explain how to implement a competitive strategy using the balanced scorecard and strategy map.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking

 

 

 

5) The balanced scorecard can be made more effective by developing it at a detail level so that employees:

1. A) Can see how it is put together.
2. B) Appreciate all the effort that goes into its preparation.
3. C) Respect management for including them in its formulation.
4. D) Can see how their actions contribute to the success of the firm.
5. E) Do not feel left out.

 

Answer:  D

Difficulty: 1 Easy

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-04 Explain how to implement a competitive strategy using the balanced scorecard and strategy map.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking

6) The Euro is:

1. A) A combination of European nations that cooperate on economic and trade matters.
2. B) A version of Disney World located near Paris.
3. C) A currency used in many European countries.
4. D) A currency used in all European countries.

 

Answer:  C

Difficulty: 1 Easy

Topic:  Execution

Learning Objective:  02-02 Explain how to implement a competitive strategy by focusing on the execution of goals.

Bloom’s:  Remember

AACSB:  Diversity

AICPA:  BB Global

 

7) The main objective of value chain analysis is to identify stages of the value chain where the firm can:

1. A) Justify increases in the price of the product or service.
2. B) Increase value to the customer or reduce cost in some way.
3. C) Outsource production to other producers.
4. D) Improve efficiency.

 

Answer:  B

Difficulty: 2 Medium

Topic:  Value-Chain Analysis

Learning Objective:  02-03 Explain how to implement a competitive strategy using value-chain analysis.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

 

8) It is becoming more common to see manufacturing firms use the value chain to take strategic steps to improve the overall profitability of the firm by:

1. A) Placing greater emphasis on the value chain.
2. B) Moving to an emphasis on upstream activities in the value chain.
3. C) Moving to an emphasis on downstream activities in the value chain.
4. D) Identifying most profitable customers.
5. E) Moving to an emphasis on both the upstream and downstream activities in the value chain.

 

Answer:  E

Difficulty: 2 Medium

Topic:  Value-Chain Analysis

Learning Objective:  02-03 Explain how to implement a competitive strategy using value-chain analysis.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

9) With regard to critical success factors, which one of the following would not be considered a financial measure of success?

1. A) Cash flow.
2. B) Growth in industry productivity.
3. C) Sales growth.
4. D) Earnings growth.
5. E) Reduction in the cost of inventory.

 

Answer:  B

Difficulty: 1 Easy

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-01 Explain how to implement a competitive strategy by using strengths-weaknesses-opportunities-threats (SWOT) analysis.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

 

10) Which one of the following customer critical success factors is best measured by warranty expense?

1. A) Quality.
2. B) Dealer and distributor efficiency and effectiveness.
3. C) Timeliness of delivery.
4. D) Customer satisfaction.

 

Answer:  A

Difficulty: 2 Medium

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-01 Explain how to implement a competitive strategy by using strengths-weaknesses-opportunities-threats (SWOT) analysis.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

11) Which one of the following is not usually included as a perspective of the balanced scorecard?

1. A) Financial Performance.
2. B) Tax Reporting.
3. C) Learning and Growth.
4. D) Customer Satisfaction.
5. E) Internal Business Processes.

 

Answer:  B

Difficulty: 1 Easy

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-04 Explain how to implement a competitive strategy using the balanced scorecard and strategy map.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

 

 

12) Which of the following best describes the type of information that cost management must provide that is most important for the success of the organization?

1. A) Short term information for decision making.
2. B) Reported financial information.
3. C) Reported nonfinancial information.
4. D) Information that addresses the strategic objectives of the organization.
5. E) Long-term planning information.

 

Answer:  D

Difficulty: 2 Medium

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-04 Explain how to implement a competitive strategy using the balanced scorecard and strategy map.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

13) After critical success factors (CSFs) have been identified, the next step in developing a competitive strategy is to develop relevant and reliable measure for these CSFs. These measures are important to help the organization:

1. A) Make profit for any extended period.
2. B) Increase sales above previous year(s).
3. C) Develop policies to enhance customer profitability.
4. D) Improve productivity in selected product areas.
5. E) Monitor progress toward achieving strategic goals.

 

Answer:  E

Difficulty: 1 Easy

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-01 Explain how to implement a competitive strategy by using strengths-weaknesses-opportunities-threats (SWOT) analysis.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

 

14) A firm has decided to use the balanced scorecard. Which of the following is not an advantage the company will gain by using the balanced scorecard?

1. A) It links the firm’s CSFs to its strategy.
2. B) It helps the firm monitor progress to achievement of its strategic goals.
3. C) It can provide a basis for implementing strategic changes desired by the firm.
4. D) It provides a comprehensive financial overview of the firm.
5. E) It helps to coordinate activities in the firm.

 

Answer:  D

Difficulty: 1 Easy

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-04 Explain how to implement a competitive strategy using the balanced scorecard and strategy map.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

15) During which step of value chain analysis will the company discover whether or not it has a cost advantage, and why?

1. A) During the first step, when the value-chain activities are identified.
2. B) During the first step, when the cost driver(s) are identified.
3. C) During the second step, when the firm develops a competitive advantage by either reducing cost or adding value.
4. D) The entire purpose of value chain analysis is to determine if the company has a cost advantage; therefore, it occurs in all steps.
5. E) In the third step, when the company adopts and implements the balanced scorecard.

 

Answer:  C

Difficulty: 2 Medium

Topic:  Value-Chain Analysis

Learning Objective:  02-03 Explain how to implement a competitive strategy using value-chain analysis.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

 

 

 

16) A local pharmaceutical firm has just announced its discovery of a revolutionary new drug for dieting. However, due to its deteriorating relationship with its union, the unionized portions of the company’s employees have threatened to strike. In addition, the company’s stock has started to drop due to the firm’s difficulty in paying off some of its debt. In this example, what was the firm’s core competency(ies)?

1. A) Its research and development.
2. B) Its human resources abilities.
3. C) Its financing activities.
4. D) Its operating activities.

 

Answer:  A

Difficulty: 1 Easy

Topic:  Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis

Learning Objective:  02-01 Explain how to implement a competitive strategy by using strengths-weaknesses-opportunities-threats (SWOT) analysis.

Bloom’s:  Analyze

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

17) During the strengths and weaknesses portion of a firm’s SWOT analysis, which of the following would not be discovered?

1. A) The firm’s method of product distribution was not very efficient.
2. B) Through continued research and development, the firm’s products were state-of-the-art.
3. C) Due to a lack of barriers to entry into the industry, several new competitors were beginning to enter the market.
4. D) The production process needed to be reengineered to reduce unnecessary scrap.
5. E) The firm’s employees are trained in new manufacturing methods each month.

 

Answer:  C

Difficulty: 2 Medium

Topic:  Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis

Learning Objective:  02-01 Explain how to implement a competitive strategy by using strengths-weaknesses-opportunities-threats (SWOT) analysis.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

 

 

 

18) When a firm is determining its opportunities and threats, which of the following would notbe mentioned?

1. A) An intense rivalry with a local competitor was beginning to start a price war.
2. B) The firm just received a patent on its main product.
3. C) The success of the firm’s latest marketing campaign.
4. D) In spite of its patent, there are several substitute products consumers could use.
5. E) Increased competition in some of its key product lines.

 

Answer:  C

Difficulty: 2 Medium

Topic:  Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis

Learning Objective:  02-01 Explain how to implement a competitive strategy by using strengths-weaknesses-opportunities-threats (SWOT) analysis.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

19) When the value of the U.S. dollar is declining relative to other currencies this means that:

1. A) U.S. exporters will face a greater challenge in exporting U.S.-made products.
2. B) U.S. firms will be eager to buy foreign products.
3. C) U.S. firms will be less profitable.
4. D) U.S. exporters will have a temporary advantage over other countries in foreign trade.
5. E) The U.S. trade balance will worsen.

 

Answer:  D

Difficulty: 3 Hard

Topic:  Execution

Learning Objective:  02-02 Explain how to implement a competitive strategy by focusing on the execution of goals.

Bloom’s:  Analyze

AACSB:  Diversity; Analytical Thinking

AICPA:  FN Risk Analysis; BB Global

 

 

 

20) The cause and effect relationships among critical success factors are best captured in:

1. A) The balanced scorecard.
2. B) Business analytics.
3. C) The value chain.
4. D) The strategy map.
5. E) SWOT analysis.

 

Answer:  D

Difficulty: 1 Easy

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-04 Explain how to implement a competitive strategy using the balanced scorecard and strategy map.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking

 

21) Which of the following types of organizations can most benefit from value chain analysis?

1. A) Service firms.
2. B) Not-for-profit organizations.
3. C) Manufacturing firms.
4. D) All types of organizations can benefit from value chain analysis.

 

Answer:  D

Difficulty: 1 Easy

Topic:  Value-Chain Analysis

Learning Objective:  02-03 Explain how to implement a competitive strategy using value-chain analysis.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

22) Which of the following would not likely be a perspective of a balanced scorecard for a consumer products retailer?

1. A) Learning and innovation.
2. B) Internal processes.
3. C) Financial performance.
4. D) Customer satisfaction.
5. E) Research and development.

 

Answer:  E

Difficulty: 1 Easy

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-04 Explain how to implement a competitive strategy using the balanced scorecard and strategy map.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Industry

 

23) Which of the following statements concerning value chain analysis is false?

1. A) The goal of value chain analysis is to find areas where a company can either add value or reduce cost.
2. B) The value chain focuses on the entire production process, as well as the sale of the product and service after the sale.
3. C) If a company cannot compete in a specific area of the value chain, it might consider the option of outsourcing that portion of the value chain to someone who can perform it better.
4. D) Throughout most industries, the most successful firms are the ones that operate within the entire value chain, thereby overseeing every aspect of the value chain for the customer.

 

Answer:  D

Difficulty: 3 Hard

Topic:  Value-Chain Analysis

Learning Objective:  02-03 Explain how to implement a competitive strategy using value-chain analysis.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

24) Which of the following would likely not be considered part of the value chain in a service firm?

1. A) Inspection of product.
2. B) Advertising.
3. C) Employee training.
4. D) Customer service.
5. E) Materials handling.

 

Answer:  E

Difficulty: 1 Easy

Topic:  Value-Chain Analysis

Learning Objective:  02-03 Explain how to implement a competitive strategy using value-chain analysis.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  FN Risk Analysis; BB Industry

 

 

 

25) When performing value chain analysis, which of the following should a firm take into account?

1. A) The firm’s competitive position.
2. B) Opportunities to reduce cost.
3. C) Possible opportunities where value can be added.
4. D) The decision to enter or leave an activity in the value chain.
5. E) All of these answer choices are correct.

 

Answer:  E

Difficulty: 2 Medium

Topic:  Value-Chain Analysis

Learning Objective:  02-03 Explain how to implement a competitive strategy using value-chain analysis.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

 

26) Both cost leadership and differentiated firms can improve on execution through:

1. A) Improved automation and a higher output of products.
2. B) Benchmarking and total quality management.
3. C) Cost cutting and downsizing of personnel.
4. D) Emphasis on research and product development.
5. E) None of these answer choices are correct.

 

Answer:  B

Difficulty: 2 Medium

Topic:  Execution

Learning Objective:  02-02 Explain how to implement a competitive strategy by focusing on the execution of goals.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

 

 

27) To increase profitability, companies such as IBM and General Electric have shifted their strategic focus toward:

1. A) Increasing equipment sales.
2. B) Improving software applications.
3. C) Providing new and enhanced customer services.
4. D) None of these answer choices are correct.

 

Answer:  C

Difficulty: 2 Medium

Topic:  Execution

Learning Objective:  02-02 Explain how to implement a competitive strategy by focusing on the execution of goals.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  FN Risk Analysis; BB Industry

 

28) Which of the following is not a key benefit of the balanced scorecard (BSC)?

1. A) It provides a means for implementing strategy.
2. B) It provides an objective basis for determining each manager’s compensation and advancement.
3. C) It provides a framework for the firm to achieve a desired organizational change in strategy.
4. D) It provides a baseline for how an organization’s financial operations compare to competition within the industry.

 

Answer:  D

Difficulty: 2 Medium

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-04 Explain how to implement a competitive strategy using the balanced scorecard and strategy map.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

 

 

29) A strategy map is:

1. A) A detailed flowchart outlining which firm managers are responsible for each implementation of a firm’s strategy and when these implementations are to take place.
2. B) A cause and effect diagram of the relationships among the balanced scorecard perspectives to show how the achievement of critical success factors in each perspective affects the achievement of goals in other perspectives and the overall financial performance of the firm.
3. C) A framework for the firm to achieve a desired organizational change in strategy while mapping the successes of other firms within the industry.
4. D) None of these answer choices are correct.

 

Answer:  B

Difficulty: 1 Easy

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-04 Explain how to implement a competitive strategy using the balanced scorecard and strategy map.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

 

30) Sustainability is the balancing of short and long term goals in all three dimensions of the company’s performance. Those three areas are:

1. A) Economic, social, and environmental.
2. B) Economic, social, and financial.
3. C) Economic, environmental, and political.
4. D) Social, environmental, and political.

 

Answer:  A

Difficulty: 1 Easy

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-05 Explain how to expand the balanced scorecard by integrating sustainability.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  FN Risk Analysis; BB Resource Management

 

 

31) Over the past several years it has become increasingly important for firms to improve achievement towards their social and environmental responsibilities. What is the best way the management accountant can help the firm improve on sustainability?

1. A) Participate in programs of environmental organizations.
2. B) Develop and implement a legal staff and public relations staff for dealing with sustainability issues that may affect the firm.
3. C) Develop and implement a sustainability scorecard.
4. D) Risk management.

 

Answer:  C

Difficulty: 3 Hard

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-05 Explain how to expand the balanced scorecard by integrating sustainability.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

 

32) In terms of strategic cost management for not-for-profit service organizations, which of the following is false?

1. A) Not-for-profit organizations can benefit from strategic cost management since they must prove their effectiveness and efficiency to a number of different stakeholders.
2. B) The balanced scorecard can be used to measure the organization’s performance.
3. C) Value chain analysis can be used for analyzing the organization’s product design, product testing, advertising, and production processes.
4. D) SWOT analysis is most helpful for non-profit organizations when it deals with the organization’s competitive threats, opportunities, and critical success factors.

 

Answer:  C

Difficulty: 1 Easy

Topic:  Value-Chain Analysis

Learning Objective:  02-03 Explain how to implement a competitive strategy using value-chain analysis.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  FN Risk Analysis; BB Industry

 

 

33) In order to remain competitive in the contemporary business environment, several firms have started training their employees to stop viewing problems as strictly functional – that is, as only a marketing problem, or an accounting problem, for example. What does this trend illustrate about strategic management?

1. A) There has been a renewed emphasis on integrative thinking and solving problem cross-functionally.
2. B) Functional barriers are an inherent part of a company’s value chain.
3. C) Firms are increasingly seeing the value of business analytics.
4. D) SWOT analysis is designed to break down functional barriers.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis

Learning Objective:  02-01 Explain how to implement a competitive strategy by using strengths-weaknesses-opportunities-threats (SWOT) analysis.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking

 

34) Which of the following organizations presents awards to firms that excel at execution of strategy, based on criteria such as leadership, marketing, strategic planning and process management?

1. A) International Organization for Standardization.
2. B) Malcolm Baldrige National Quality Program.
3. C) Global Reporting Initiative.
4. D) World Resources Institute.
5. E) American Institute of Certified Public Accountants.

 

Answer:  B

Difficulty: 2 Medium

Topic:  Execution

Learning Objective:  02-02 Explain how to implement a competitive strategy by focusing on the execution of goals.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking

 

 

35) The financial critical success factor of profitability can be measured by:

1. A) Community service activities.
2. B) Customer returns and complaints.
3. C) Number of product defects.
4. D) Number of design changes.
5. E) Earnings from operations.

 

Answer:  E

Difficulty: 1 Easy

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-04 Explain how to implement a competitive strategy using the balanced scorecard and strategy map.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

36) Using value-chain analysis, a firm can develop a competitive advantage by specifically looking for ways to:

1. A) Add value and reduce cost.
2. B) Improve manufacturing productivity.
3. C) Improve customer service.
4. D) Improve product quality.
5. E) Reduce organizational risk.

 

Answer:  A

Difficulty: 1 Easy

Topic:  Value-Chain Analysis

Learning Objective:  02-03 Explain how to implement a competitive strategy using value-chain analysis.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

 

 

 

37) Value activities can best be defined as:

1. A) Activities that firms in the industry must perform to improve a product.
2. B) Activities that firms in the industry must perform in the process of producing the product or providing the service.
3. C) Activities that firms in the industry must perform in the process of closing down a product line, including customer service.
4. D) Activities that firms in the industry must perform to consider ways of marketing a product.
5. E) Activities that firms in the industry must perform in the process of considering new products, including customer service.

 

Answer:  B

Difficulty: 3 Hard

Topic:  Value-Chain Analysis

Learning Objective:  02-03 Explain how to implement a competitive strategy using value-chain analysis.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking

38) The World Resources Institute has defined:

1. A) Types of cost management.
2. B) Categories for environmental performance indicators.
3. C) Methods for achieving sustainability.
4. D) Categories for economic performance indicators.

 

Answer:  B

Difficulty: 2 Medium

Topic:  The Balanced Scorecard, Strategy Map, and Sustainability

Learning Objective:  02-05 Explain how to expand the balanced scorecard by integrating sustainability.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Global

 

 

 

39) A firm succeeds on its ability to deliver products to customers more quickly than rival companies in its industry. This skill is an example of the firm’s:

1. A) Core competency.
2. B) Research effectiveness.
3. C) Production efficiency.
4. D) Cost control effectiveness.
5. E) Value-chain analysis.

 

Answer:  A

Difficulty: 1 Easy

Topic:  Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis

Learning Objective:  02-01 Explain how to implement a competitive strategy by using strengths-weaknesses-opportunities-threats (SWOT) analysis.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Resource Management

 

40) SWOT analysis, a valuable analysis tool, stands for:

1. A) Strengths – Workability – Opportunities – Threats.
2. B) Strategies – Weaknesses – Opportunities – Threats.
3. C) Strengths – Weaknesses – Observations – Threats.
4. D) Strengths – Weaknesses – Opportunities – Threats.
5. E) Strategies – Weaknesses – Observations – Threats.

 

Answer:  D

Difficulty: 1 Easy

Topic:  Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis

Learning Objective:  02-01 Explain how to implement a competitive strategy by using strengths-weaknesses-opportunities-threats (SWOT) analysis.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Risk Analysis

 

Cost Management: A Strategic Emphasis, 8e (Blocher)

Chapter 4   Job Costing

 

1) Product costing provides useful cost information for all the following except:

1. A) Both manufacturing and non-manufacturing firms.
2. B) For non-manufacturing firms.
3. C) Management planning, cost control, and performance evaluation.
4. D) Financial statement reporting.
5. E) Identifying and hiring competent managers.

 

Answer:  E

Difficulty: 2 Medium

Topic:  The Strategic Role of Costing; Costing Systems

Learning Objective:  04-01 Explain the types of costing systems.; 04-02 Explain the strategic role of costings.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

2) The key distinction between job costing and process costing is:

1. A) The difference in detail required by each approach.
2. B) The use made of the collected data.
3. C) The journal entries required.
4. D) The accumulation of costs to assign to cost objects.
5. E) The standards applied.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Costing Systems

Learning Objective:  04-01 Explain the types of costing systems.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

3) Standard costs are:

1. A) Planned costs the firm should attain.
2. B) Associated with direct materials and factory overhead only.
3. C) Associated with direct labor and factory overhead only.
4. D) Targeted low costs the firm should strive for.

 

Answer:  A

Difficulty: 1 Easy

Topic:  Costing Systems

Learning Objective:  04-01 Explain the types of costing systems.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

4) Which of the following can produce unit product costs that fluctuate significantly?

1. A) Actual costing system.
2. B) Standard costing system.
3. C) Normal costing system.
4. D) Industry costing system.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Job Costing: The Cost Flows

Learning Objective:  04-03 Explain the flow of costs in a job costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

5) A normal costing system uses actual costs for direct materials and direct labor, and:

1. A) Actual costs for factory overhead.
2. B) Estimated factory overhead costs based on material cost.
3. C) Estimated costs that the firm should attain.
4. D) Estimated costs for factory overhead.
5. E) Charges actual factory overhead as a lump sum.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Job Costing: The Cost Flows; Costing Systems

Learning Objective:  04-01 Explain the types of costing systems.; 04-03 Explain the flow of costs in a job costing system.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

6) Product costing system design or selection:

1. A) Involves cost management expertise.
2. B) Requires an understanding of the nature of the business.
3. C) Should provide useful cost information for strategic and operational decision needs.
4. D) Should be cost effective in design and operation.
5. E) All of these answer choices are correct.

 

Answer:  E

Difficulty: 2 Medium

Topic:  The Strategic Role of Costing

Learning Objective:  04-02 Explain the strategic role of costings.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

7) If a firm is following the cost leadership strategy, and overhead accounts are complex, then the:

1. A) Firm should use a process costing system.
2. B) Firm can use either a project or job costing system.
3. C) Traditional volume-based job costing will not usually provide the needed cost accuracy.
4. D) Only recourse is to install a hybrid costing system.
5. E) Firm should attempt to collect only material and labor costs.

 

Answer:  C

Difficulty: 3 Hard

Topic:  The Strategic Role of Costing

Learning Objective:  04-02 Explain the strategic role of costings.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

8) The three major differences between process and job order costing systems are those relating to:

1. A) Quantity, quality, and cost.
2. B) Speed, accuracy, and design.
3. C) Cost object, product or service variety, and timing of unit cost calculation.
4. D) Responsibility for cost, system design, and authorization codes.
5. E) None of these answer choices are correct.

 

Answer:  C

Difficulty: 2 Medium

Topic:  The Strategic Role of Costing

Learning Objective:  04-02 Explain the strategic role of costings.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

9) The two main advantages of using predetermined factory overhead rates are to provide more accurate unit cost information and to:

1. A) Simplify the accounting process.
2. B) Provide cost information on a timely basis.
3. C) Insure transmission of correct data.
4. D) Extend the useful life of the cost data.
5. E) Adjust for variances in data sources.

 

Answer:  B

Difficulty: 2 Medium

Topic:  Costing Systems

Learning Objective:  04-01 Explain the types of costing systems.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

10) The ideal criterion for choosing an allocation base for overhead is:

1. A) Ease of calculation.
2. B) A cause-and-effect relationship.
3. C) Ease of use.
4. D) Its preciseness.
5. E) Its applicability.

 

Answer:  B

Difficulty: 1 Easy

Topic:  Costing Systems

Learning Objective:  04-01 Explain the types of costing systems.; 04-04 Explain the application of factory overhead costs in a job costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

11) Volume-based rates are appropriate in situations where the incurrence of factory overhead:

1. A) Is related to multiple cost drivers.
2. B) Is related to several non-homogeneous cost drivers.
3. C) Is related to a single, common cost driver.
4. D) Varies considerably from period to period.
5. E) Is relatively small in amount.

 

Answer:  C

Difficulty: 2 Medium

Topic:  Costing Systems

Learning Objective:  04-01 Explain the types of costing systems.; 04-04 Explain the application of factory overhead costs in a job costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

12) Departmental rates are appropriate when all the following exist except:

1. A) Not all products pass through the same processes.
2. B) Departments are not similar in function.
3. C) Departments have dissimilar cost drivers.
4. D) All departments have similar cost drivers and cost usage characteristics.
5. E) Products consume departmental resources in a significantly different manner.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Costing Systems

Learning Objective:  04-04 Explain the application of factory overhead costs in a job costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

13) Volume-based cost accounting systems often do not provide sufficiently accurate product costing because they:

1. A) Use only volume-based cost drivers.
2. B) Fail to recognize the impact of overhead in product cost.
3. C) Often do not reflect changes in major cost categories caused by plant automation.
4. D) Too often use an allocation base that does not have a cause-effect relationship to resource usage.
5. E) Product costs involve both fixed and variable costs.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Costing Systems

Learning Objective:  04-01 Explain the types of costing systems.; 04-04 Explain the application of factory overhead costs in a job costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

14) Under job costing, factory overhead costs are assigned to products or services using labor or machine hours which are:

1. A) Multiple cost pools.
2. B) A homogeneous cost pool.
3. C) Volume-based cost drivers.
4. D) Non-volume-based cost drivers only.
5. E) Activity-based cost drivers.

 

Answer:  C

Difficulty: 1 Easy

Topic:  Costing Systems

Learning Objective:  04-06 Apply job costing to a service industry.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

15) Operation costing is a hybrid costing system for products and services that uses:

1. A) Job costing to assign direct material costs and standard costing for conversion cost.
2. B) Process costing to assign conversion costs and normal costing for materials cost.
3. C) Job costing for direct materials costs and process costing for conversion cost.
4. D) Normal costing for conversion cost and process costing for materials cost.

 

Answer:  C

Difficulty: 1 Easy

Topic:  Operation Costing

Learning Objective:  04-07 Explain an operation costing system.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

16) Cost system design/selection should consider all except which one of the following?

1. A) Cost/benefit of system design/selection and operation.
2. B) A firm’s strategy and management information needs.
3. C) Customer needs.
4. D) Nature of the industry, product, or service.

 

Answer:  C

Difficulty: 1 Easy

Topic:  Costing Systems

Learning Objective:  04-01 Explain the types of costing systems.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

17) Which one of the following documents records and summarizes the costs of direct materials, direct labor, and factory overhead for a particular job?

1. A) Purchase order.
2. B) Material requisition form.
3. C) Job product cost document.
4. D) Bill of materials.
5. E) Job cost sheet.

 

Answer:  E

Difficulty: 1 Easy

Topic:  Job Costing: The Cost Flows

Learning Objective:  04-03 Explain the flow of costs in a job costing system.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

18) Which one of the following is used by the production department supervisor to request the materials for production?

1. A) Purchase order.
2. B) Material requisition.
3. C) Bill of materials.
4. D) Product job cost schedule.
5. E) Job cost sheet.

 

Answer:  B

Difficulty: 1 Easy

Topic:  Job Costing: The Cost Flows

Learning Objective:  04-03 Explain the flow of costs in a job costing system.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

19) Which one of the following is the amount of factory overhead applied that exceeds the actual factory overhead cost?

1. A) Factory overhead applied.
2. B) Actual factory overhead.
3. C) Overapplied overhead.
4. D) Allocated factory overhead.
5. E) Underapplied overhead.

 

Answer:  C

Difficulty: 1 Easy

Topic:  Under- and Overapplied Overhead

Learning Objective:  04-05 Calculate underapplied and overapplied overhead and show how it is accounted for.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

20) Which one of the following is the amount that actual factory overhead exceeds the factory overhead applied?

1. A) Factory overhead applied.
2. B) Actual factory overhead.
3. C) Overapplied overhead.
4. D) Allocated factory overhead.
5. E) Underapplied overhead.

 

Answer:  E

Difficulty: 1 Easy

Topic:  Under- and Overapplied Overhead

Learning Objective:  04-05 Calculate underapplied and overapplied overhead and show how it is accounted for.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

 

21) The total cost of direct materials, direct labor, and factory overhead transferred from the Work-in-Process Inventory account to the Finished Goods Inventory account during an accounting period is:

1. A) Normal cost of goods sold.
2. B) Adjusted cost of goods sold.
3. C) Total manufacturing cost.
4. D) Cost of goods manufactured.
5. E) Actual cost of goods sold.

 

Answer:  D

Difficulty: 1 Easy

Topic:  Job Costing: The Cost Flows

Learning Objective:  04-03 Explain the flow of costs in a job costing system.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

22) A hybrid costing system that uses job costing to assign direct materials costs, and process costing to assign conversion costs to products or services is:

1. A) Process costing.
2. B) Operation costing.
3. C) Actual costing.
4. D) Product costing.
5. E) Job costing.

 

Answer:  B

Difficulty: 1 Easy

Topic:  Operation Costing

Learning Objective:  04-07 Explain an operation costing system.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

23) The journal entry required to record factory depreciation includes:

1. A) A debit to the Cost of Goods Manufactured account.
2. B) A debit to the Factory Overhead account.
3. C) A debit to the Depreciation Expense account.
4. D) A debit to the Accumulated Depreciation account.

 

Answer:  B

Difficulty: 2 Medium

Topic:  Job Costing: The Cost Flows

Learning Objective:  04-03 Explain the flow of costs in a job costing system.

Bloom’s:  Analyze

AACSB:  Analytical Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

24) Factory overhead can be over- or under-applied because:

1. A) Some actual factory overhead cost varies from the expected.
2. B) Some actual factory overhead costs are incurred unexpectedly.
3. C) Production volume may vary from expected volume.
4. D) All of these answer choices are correct.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Under- and Overapplied Overhead

Learning Objective:  04-04 Explain the application of factory overhead costs in a job costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

25) When completed units are transferred to the warehouse:

1. A) Cost of Goods Sold account is debited.
2. B) Cost of Goods Manufactured account is debited.
3. C) Finished Goods Inventory account is debited.
4. D) Work-in-Process Inventory account is debited.
5. E) Finished Goods Inventory account is credited.

 

Answer:  C

Difficulty: 2 Medium

Topic:  Job Costing: The Cost Flows

Learning Objective:  04-03 Explain the flow of costs in a job costing system.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

26) When completed units are sold:

1. A) Cost of Goods Sold account is credited.
2. B) Cost of Goods Manufactured account is credited.
3. C) Finished Goods Inventory account is credited.
4. D) Work-in-Process Inventory account is credited.
5. E) Finished Goods Inventory account is debited.

 

Answer:  C

Difficulty: 1 Easy

Topic:  Job Costing: The Cost Flows

Learning Objective:  04-03 Explain the flow of costs in a job costing system.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

 

27) Which of the following industries is more suitable for using a job costing system?

1. A) Chemical plants.
2. B) Petroleum product manufacturing.
3. C) Medical clinics.
4. D) Cement manufacturing.
5. E) Food processing.

 

Answer:  C

Difficulty: 2 Medium

Topic:  The Strategic Role of Costing; Costing Systems

Learning Objective:  04-01 Explain the types of costing systems.; 04-02 Explain the strategic role of costings.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA:  FN Measurement; BB Industry

28) The system where the cost of a product or service is obtained by assigning costs to masses of similar units in each department and then computing unit cost on an average basis is called:

1. A) A process costing system.
2. B) A job costing system.
3. C) An activity-based costing system.
4. D) An inventory materials control system.

 

Answer:  A

Difficulty: 1 Easy

Topic:  Costing Systems

Learning Objective:  04-01 Explain the types of costing systems.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

29) All of the following items are debited to the Work-in-Process Inventory account except:

1. A) Cost of the completed goods being transferred out of the plant.
2. B) Direct labor cost consumed/incurred.
3. C) Direct materials cost consumed/used.
4. D) Applied factory overhead cost.

 

Answer:  A

Difficulty: 1 Easy

Topic:  Job Costing: The Cost Flows

Learning Objective:  04-03 Explain the flow of costs in a job costing system.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

 

 

30) Normal spoilage is defined as:

1. A) Spoilage that occurs under efficient operations.
2. B) Scrap.
3. C) Uncontrollable waste as a result of a special production run.
4. D) Spoilage that arises under inefficient operations.
5. E) Controllable spoilage.

 

Answer:  A

Difficulty: 1 Easy

Topic:  Spoilage, Rework, and Scrap in Job Costing

Learning Objective:  04-08 Explain how to handle spoilage, rework, and scrap in a job costing system (appendix).

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

31) Abnormal spoilage:

1. A) Is considered part of good production.
2. B) Arises under efficient operating conditions.
3. C) Is controllable in the short run.
4. D) Is unacceptable spoilage that should not occur under efficient operating conditions.
5. E) Is part of inventory product cost.

 

Answer:  D

Difficulty: 1 Easy

Topic:  Spoilage, Rework, and Scrap in Job Costing

Learning Objective:  04-08 Explain how to handle spoilage, rework, and scrap in a job costing system (appendix).

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

32) For job costing in service industries, overhead costs are usually applied to jobs based on:

1. A) Factory overhead.
2. B) Indirect labor.
3. C) Indirect materials.
4. D) Direct labor-hours or dollars.
5. E) Direct materials.

 

Answer:  D

Difficulty: 1 Easy

Topic:  Applying Overhead Costs for a Project or Service

Learning Objective:  04-06 Apply job costing to a service industry.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA:  BB Critical Thinking; FN Measurement

 

33) Badour Inc. is a job-order manufacturer. The company uses a predetermined overhead rate based on direct labor hours to apply overhead to individual jobs. For the current year, estimated direct labor hours were 114,000 and estimated factory overhead was $695,400. The following information was for September. Job X was completed during September, while Job Y was started but not finished.

	September 1, inventories:
	Materials	$	9,000
	Work-in-process (All Job X)		37,400
	Finished goods		80,400
	Materials purchases	$	125,000
	Direct materials requisitioned:
	Job X	$	54,500
	Job Y		40,000
	Direct labor hours:
	Job X		5,000
	Job Y		4,500
	Labor costs incurred:
	Direct labor ($6.00 per hour)	$	57,000
	Indirect labor		16,200
	Factory supervisory salaries		7,200
	Rental costs:
	Factory	$	8,400
	Administrative offices		2,200
	Total equipment depreciation costs:
	Factory	$	9,000
	Administrative offices		1,900
	Indirect materials used	$	14,400

 

The total cost of Job X is:

400. A) $152,400.
401. B) $128,200.
402. C) $151,900.
403. D) $129,600.
404. E) $140,800.

 

Answer:  A

Explanation:  Overhead application rate = $695,400/114,000 = $6.10 per DL-hour

Materials + Labor + Applied OH + Beginning WIP = Total cost of Job X

$54,500 + (5,000 × $6) + (5,000 × $6.10) + $37,400 = $152,400

Difficulty: 2 Medium

Topic:  Costing Systems

Learning Objective:  04-04 Explain the application of factory overhead costs in a job costing system.

Bloom’s:  Apply

AACSB:  Knowledge Application

AICPA:  BB Critical Thinking; FN Measurement

 

34) Badour Inc. is a job-order manufacturer. The company uses a predetermined overhead rate based on direct labor hours to apply overhead to individual jobs. For the current year, estimated direct labor hours were 114,000 and estimated factory overhead was $695,400. The following information was for September. Job X was completed during September, while Job Y was started but not finished.

	September 1, inventories:
	Materials	$	9,000
	Work-in-process (All Job X)		37,400
	Finished goods		80,400
	Materials purchases	$	125,000
	Direct materials requisitioned:
	Job X	$	54,500
	Job Y		40,000
	Direct labor hours:
	Job X		5,000
	Job Y		4,500
	Labor costs incurred:
	Direct labor ($6.00 per hour)	$	57,000
	Indirect labor		16,200
	Factory supervisory salaries		7,200
	Rental costs:
	Factory	$	8,400
	Administrative offices		2,200
	Total equipment depreciation costs:
	Factory	$	9,000
	Administrative offices		1,900
	Indirect materials used	$	14,400

 

The total factory overhead applied during September is:

300. A) $59,300.
301. B) $57,950.
302. C) $57,848.
303. D) $56,120.
304. E) $57,710.

 

Answer:  B

Explanation:  $57,950 = (5,000 + 4,500) × ($6.10)

Where $6.10 = $695,400/114,000 = Predetermined Overhead Rate

Difficulty: 2 Medium

Topic:  Costing Systems

Learning Objective:  04-04 Explain the application of factory overhead costs in a job costing system.

Bloom’s:  Apply

AACSB:  Knowledge Application

AICPA:  BB Critical Thinking; FN Measurement

 

35) Badour Inc. is a job-order manufacturer. The company uses a predetermined overhead rate based on direct labor hours to apply overhead to individual jobs. For the current year, estimated direct labor hours were 114,000 and estimated factory overhead was $695,400. The following information was for September. Job X was completed during September, while Job Y was started but not finished.

	September 1, inventories:
	Materials	$	9,000
	Work-in-process (All Job X)		37,400
	Finished goods		80,400
	Materials purchases	$	125,000
	Direct materials requisitioned:
	Job X	$	54,500
	Job Y		40,000
	Direct labor hours:
	Job X		5,000
	Job Y		4,500
	Labor costs incurred:
	Direct labor ($6.00 per hour)	$	57,000
	Indirect labor		16,200
	Factory supervisory salaries		7,200
	Rental costs:
	Factory	$	8,400
	Administrative offices		2,200
	Total equipment depreciation costs:
	Factory	$	9,000
	Administrative offices		1,900
	Indirect materials used	$	14,400

 

The underapplied or overapplied overhead for September is:

1. A) $2,750 underapplied.
2. B) $2,750 overapplied.
3. C) $920 overapplied.
4. D) $920 underapplied.
5. E) $1,450 underapplied.

 

 

 

Answer:  B

Explanation:  $57,950 − $55,200 = $2,750 overapplied

Actual factory overhead = $16,200 + 7,200 + 8,400 + 9,000 + 14,400 = $55,200

Where $6.10 = $695,400/114,000 = Predetermined Overhead Rate

Difficulty: 2 Medium

Topic:  Under- and Overapplied Overhead

Learning Objective:  04-05 Calculate underapplied and overapplied overhead and show how it is accounted for.

Bloom’s:  Apply

AACSB:  Knowledge Application

AICPA:  BB Critical Thinking; FN Measurement

 

 

 

36) Beckner Inc. is a job-order manufacturer. The company uses a predetermined overhead rate based on direct labor hours to apply overhead to individual jobs. For the current year, estimated direct labor hours are 133,000 and estimated factory overhead is $784,700. The following information is for September. Job X was completed during September, while Job Y was started but not finished.

	September 1, inventories:
	Materials	$	24,000
	Work-in-process (All Job X)		53,400
	Finished goods		105,600
	Materials purchases	$	157,000
	Direct materials requisitioned:
	Job X	$	74,000
	Job Y		68,000
	Direct labor hours:
	Job X		7,000
	Job Y		5,500
	Labor costs incurred:
	Direct labor ($6.00 per hour)	$	75,000
	Indirect labor		24,200
	Factory supervisory salaries		11,100
	Rental costs:
	Factory	$	9,300
	Administrative offices		3,200
	Total equipment depreciation costs:
	Factory	$	10,400
	Administrative offices		2,800
	Indirect materials used	$	17,800

The total factory overhead applied during September is:

300. A) $79,300.
301. B) $57,572.
302. C) $73,750.
303. D) $68,120.
304. E) $51,710.

 

Answer:  C

Explanation:  (7,000 + 5,500) × ($5.90) = $73,750

Where $5.90 = Pre-determined Overhead Rate = $784,700/133,000

Difficulty: 2 Medium

Topic:  Costing Systems

Learning Objective:  04-04 Explain the application of factory overhead costs in a job costing system.

Bloom’s:  Apply

AACSB:  Knowledge Application

AICPA:  BB Critical Thinking; FN Measurement

 

 

 

37) Beckner Inc. is a job-order manufacturer. The company uses a predetermined overhead rate based on direct labor hours to apply overhead to individual jobs. For the current year, estimated direct labor hours are 133,000 and estimated factory overhead is $784,700. The following information is for September. Job X was completed during September, while Job Y was started but not finished.

	September 1, inventories:
	Materials	$	24,000
	Work-in-process (All Job X)		53,400
	Finished goods		105,600
	Materials purchases	$	157,000
	Direct materials requisitioned:
	Job X	$	74,000
	Job Y		68,000
	Direct labor hours:
	Job X		7,000
	Job Y		5,500
	Labor costs incurred:
	Direct labor ($6.00 per hour)	$	75,000
	Indirect labor		24,200
	Factory supervisory salaries		11,100
	Rental costs:
	Factory	$	9,300
	Administrative offices		3,200
	Total equipment depreciation costs:
	Factory	$	10,400
	Administrative offices		2,800
	Indirect materials used	$	17,800

The underapplied or overapplied overhead for September is:

1. A) $2,350 underapplied.
2. B) $2,350 overapplied.
3. C) $950 overapplied.
4. D) $950 underapplied.
5. E) $1,450 underapplied.

 

Answer:  C

Explanation:  Actual Overhead = $24,200 + 11,100 + 9,300 + 10,400 + 17,800 = $72,800

$73,750 − $72,800 = $950 Overapplied

(7,000 + 5,500) × ($5.90) = $73,750

Where $5.90 = Pre-determined Overhead Rate = $784,700/133,000

Difficulty: 2 Medium

Topic:  Under- and Overapplied Overhead

Learning Objective:  04-05 Calculate underapplied and overapplied overhead and show how it is accounted for.

Bloom’s:  Apply

AACSB:  Knowledge Application

AICPA:  BB Critical Thinking; FN Measurement

 

38) Beckner Inc. is a job-order manufacturer. The company uses a predetermined overhead rate based on direct labor hours to apply overhead to individual jobs. For the current year, estimated direct labor hours are 133,000 and estimated factory overhead is $784,700. The following information is for September. Job X was completed during September, while Job Y was started but not finished.

	September 1, inventories:
	Materials	$	24,000
	Work-in-process (All Job X)		53,400
	Finished goods		105,600
	Materials purchases	$	157,000
	Direct materials requisitioned:
	Job X	$	74,000
	Job Y		68,000
	Direct labor hours:
	Job X		7,000
	Job Y		5,500
	Labor costs incurred:
	Direct labor ($6.00 per hour)	$	75,000
	Indirect labor		24,200
	Factory supervisory salaries		11,100
	Rental costs:
	Factory	$	9,300
	Administrative offices		3,200
	Total equipment depreciation costs:
	Factory	$	10,400
	Administrative offices		2,800
	Indirect materials used	$	17,800

The total ending work-in-process for September is:

1. A) $68,000.
2. B) $101,000.
3. C) $133,450.
4. D) $157,300.
5. E) $53,400.

 

Answer:  C

Explanation:  $68,000 + ($6 × 5,500) + ($5.90 × 5,500) = $133,450

Difficulty: 2 Medium

Topic:  Job Costing: The Cost Flows; Costing Systems

Learning Objective:  04-03 Explain the flow of costs in a job costing system.; 04-04 Explain the application of factory overhead costs in a job costing system.

Bloom’s:  Apply

AACSB:  Knowledge Application

AICPA:  BB Critical Thinking; FN Measurement

 

 

 

39) Beckner Inc. is a job-order manufacturer. The company uses a predetermined overhead rate based on direct labor hours to apply overhead to individual jobs. For the current year, estimated direct labor hours are 133,000 and estimated factory overhead is $784,700. The following information is for September. Job X was completed during September, while Job Y was started but not finished.

	September 1, inventories:
	Materials	$	24,000
	Work-in-process (All Job X)		53,400
	Finished goods		105,600
	Materials purchases	$	157,000
	Direct materials requisitioned:
	Job X	$	74,000
	Job Y		68,000
	Direct labor hours:
	Job X		7,000
	Job Y		5,500
	Labor costs incurred:
	Direct labor ($6.00 per hour)	$	75,000
	Indirect labor		24,200
	Factory supervisory salaries		11,100
	Rental costs:
	Factory	$	9,300
	Administrative offices		3,200
	Total equipment depreciation costs:
	Factory	$	10,400
	Administrative offices		2,800
	Indirect materials used	$	17,800

 

Cost of goods manufactured for September is:

600. A) $105,600.
601. B) $157,300.
602. C) $169,400.
603. D) $145,500.
604. E) $210,700.

 

Answer:  E

Explanation:  $53,400 + $74,000 + (7,000 × $6) + (7,000 × $5.90) = $210,700

Where $5.90 = Pre-determined Overhead Rate = $784,700/133,000

Difficulty: 2 Medium

Topic:  Job Costing: The Cost Flows; Costing Systems

Learning Objective:  04-03 Explain the flow of costs in a job costing system.; 04-04 Explain the application of factory overhead costs in a job costing system.

Bloom’s:  Apply

AACSB:  Knowledge Application

AICPA:  BB Critical Thinking; FN Measurement