Cost Accounting Exam #1, Spring 2005

Name_____________________________ Multiple Choice

1. Your close friend and drinking buddy asks you for information that is typically available only to company management. Sharing this information with your friend violates the ethical standard of a. privileged information. b. independence. c. integrity. d. confidentiality. Which of the following is not one of the courses of action recommended by the IMA for practitioners of management accounting faced with significant ethical issues. a. follow the established policies of the organization bearing on the resolution of such conflict. b. discuss the ethical problems with the individual(s) you believe is involved. c. discuss the ethical problems with the immediate superior except when it appears that the superior is involved . d. consult your own attorney as to legal obligations and rights. Strategic management can be defined as the development of a sustainable: A) chain of command. B) competitive position. C) cash flow. D) business entity. E) company image. A local area consulting firm is trying to increase the long-term strategy focus of its company reports. Therefore, the firm has decided to use a balanced scorecard. What type of new information (i.e., information the company currently doesn't use), should the company include? A) Customer information, such as: customer satisfaction, number of on time deliveries B) Information about internal business processes, such as: cycle time, number of new product introductions C) Information about employee learning. D) All of the above. The Institute of Management Accountants' standards of ethical conduct for management accountants include the elements of A) competence, confidentiality, integrity, and relevance B) competence, confidentiality, integrity and objectivity C) competence, confidentiality, independence, and objectivity D) competence, conciseness, integrity, and independence According to the IMA Code of Ethics, what should a management accountant do if a significant ethical situation can't be resolved? A) the accountant should confront the guilty party and demand the unethical action be stopped. B) the accountant should try to rationalize and understand the position of the other party. C) the accountant should say nothing about the matter until he or she has retired. D) the accountant should consider resigning from the firm, and determine if it is appropriate to notify external authorities.

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Cost Accounting Exam #1, Spring 2005

7. Financial Statement information plays a critical role in which of the following? A) Balanced Scorecard B) Executive compensation C) Planning & decision making D) All of the above The competitive strategy of "cost leadership" allows a firm to out-perform competitors by producing products or services: A) with lowered quality standards, thus reducing overall costs. B) in smaller operational units. C) at a lower cost by increased productivity D) with attractive added features making the product more expensive, or "the cost leader". E) that are heavily promoted and heavily warranted. The competitive strategy of "differentiation" requires that a product or service must be: A) always readily available B) price competitive C) produced at the lowest possible cost D) unique in some important way, usually of being of higher quality E) marketed in different ways to different groups In SWOT analysis, strengths and weaknesses are most easily identified by looking: A) at the firm as a potential customer. B) inside the firm at its specific resources C) at the firm's competition. D) at the firm's product. E) outside the firm from a consultant's perspective. 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? A) It will link the company's CSFs to its strategy. B) It will monitor the firm's achievement towards its strategic goals. C) It will include all the company's CSFs. D) It will provide a complete, absolutely precise, and accurate financial overview of the firm. Rather than being a bean counter, who focuses solely on financial data, the role of the management accountant has shifted to encompass more of a strategic management perspective. A) True. B) False. Which of following statements is false concerning strategic positioning? A) Once a firm has chosen a position, it is unwise to change it, even though the company or business environment might change. B) If a firm does decide to compete on more than one strategic position, it runs the risk of getting "stuck in the middle" between the various positions. C) Since the business environment is always changing, rather than stick constantly with one strategic position, firms should pay close attention during times of change, and adjust their strategies accordingly.

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Cost Accounting Exam #1, Spring 2005

14. Which of the following statements concerning value chain analysis is false? A) The goal of value chain analysis is to find area where a company can either add value or reduce cost. B) The value chain focuses on the entire production process, as well as the sale of the product and service after the sale. C) If a company discovers that it can't compete in a specific area of the value chain, it might want to consider the option of outsourcing that portion of the value chain to someone who can perform it better. D) Throughout business, the most successful firms are the ones that operate within the entire value chain, thereby overseeing every aspect of the production process. All indirect manufacturing costs are commonly combined into a single cost pool called: A) indirects. B) overruns. C) composites. D) overhead. E) other. Variable costs within the "relevant range" for a firm are assumed: A) not to vary per unit. B) not to vary in total. C) to be nonlinear. D) to be curvilinear. How will unit (or average) cost of manufacturing (materials, labor and overhead) usually change if the production level rises? A) It will remain constant. B) It will increase in direct proportion to the production increase. C) It will increase, but inversely with the production increase. D) It will decrease inversely and in direct proportion to the production increases. E) It will decrease, but not in direct proportion to the production increase. Any product, service, or organizational unit to which costs are assigned for some management purpose is a (n) A) cost object. B) direct cost. C) indirect cost. D) cost driver. E) allocation base.

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Problem 1

Cost Accounting Exam #1, Spring 2005

The following information applies to the Flynn Tool Co. for the year ended December 31, 2005: Sales Revenue $2,300,000 Direct Materials Inventory Jan. 1, 2005 $ 86,000 Direct LaborWages $ 425,000 Indirect Materials $ 66,000 Indirect Labor $ 28,000 Plant Utilities $ 40,000 Finished Goods Inventory Jan. 1, 2005 $ 25,000 Work-in-Process Inventory Dec. 31, 2005 $ 33,000 SuppliesAdministrative Office $ 3,500 Finished Goods Inventory Dec. 31, 2005 $ 44,000 Direct Materials Inventory Dec. 31, 2005 $ 35,000 Sales Representatives Salaries $ 195,000 WorkinProcess Inventory Jan 1, 2005 $ 27,000 Direct Materials Purchases $ 555,000 Factory Rent $ 279,000 Depreciation Expense--Admin. Office $ 88,000 . Required: Prepare a statement of cost of goods manufactured and an income statement for the year ended December 31, 2005.

Problem 2
Barnes Company listed the following data for 2005:

Cost Accounting Exam #1, Spring 2005

Factory overhead Direct labor hours Machine hours

Budgeted $1,143,800 86,000 28,595

Actual $1,101,770 87,200 28,300

Required: (a) Assuming Barnes applied overhead based on direct labor hours, calculate the company's predetermined overhead rate for 2005. (b) Assuming Barnes applied overhead based on machine hours, calculate the company's predetermined overhead rate for 2005. (c) If overhead is applied based on direct labor hours, calculate the overapplied/underapplied overhead. (d) If overhead is applied based on machine hours, calculate the overapplied/underapplied overhead. (e) What should Barnes do with the overapplied/underapplied overhead?

Cost Accounting Exam #1, Spring 2005