Exam 5: Accounting for Inventory

The "net present value" of any investment equals the difference between the investment and the present value of the expected cash flows.

One underlying assumption of the high-low estimation method is that all costs are either fixed or proportional.

"Opportunity costs" are often relevant to short-term decisions.

Budgets are the same as predictions or forecasts of future activity.

Which of the following is usually not a "relevant" factor in making short-term decisions?

Rochester Company makes a product called Z3 as part of its manufacturing process.The variable costs of making Z3 are as follows: Direct materials $8 Direct labor $12 Variable overhead $20 The Toronto Corp. has offered to sell 10,000 units of Z3 to Rochester at a price of $40 per unit. If Rochester agrees to this deal, Rochester will also be able to reduce its fixed costs by $50,000. Rochester should:

Assume that the standard cost to make one finished unit includes two hours of direct labor at $8 per hour. During April, 22,000 direct labor hours were worked, 10,500 units of product were manufactured, and total direct labor cost was $170,000. What is the (approximate) labor rate variance for April?

A graph showing the relation between the costs of outputs and the amount of a cost driver would be a straight line, starting at the origin, for a proportional cost relation.

The type of budget that adjusts the budgeted costs as levels of revenue and output vary is called a

The high-low estimation method of determining costs works well, even if the low production day was one that was affected by non-typical events.

Let AP = actual price the company pays for variable overhead costs per direct labor hour, SP = the standard price the company planned to pay for variable overhead per direct labor hour, AH = the actual direct labor hours used, and SH = the standard direct labor hours for a given level of production. The variable overhead efficiency variance equals

Assume that the standard cost to make one finished unit includes two hours of direct labor at $8 per hour. During April, 22,000 direct labor hours were worked, 10,500 units of product were manufactured, and total direct labor cost was $170,000. What is the (approximate) labor efficiency variance for April?

The word that refers to an attribute of any two or more resources that can be substituted without affecting the costs of the other resources that are required to carry out the activities to which these resources are devoted is

The method of evaluating long-term capital investments that expresses the average future increased profits as a percentage of the initial investment is the

The "unit contribution margin" equals the selling price per unit minus the per-unit variable costs.

According to the IMA, one objective of managerial costing systems is to model quantitative cause-and-effect linkages between inputs and outputs.

The direct labor efficiency variance = actual rate × (actual labor hours - standard labor hours)

One assumption of "cost-volume-profit" analysis is that costs are either fixed or proportional within some relevant range of production.

Chi Corp. uses the high-low method to estimate how its costs vary with levels of production. For the year, its high production was 50,000 units in a day, at a cost of $1,000,000, and its low production was 30,000 units, at a cost of $700,000. Its fixed costs are

The Molly Corp. makes and sells 400,000 desks each year. The total fixed costs are $40,000,000. Its variable costs are: labor of $90 per desk; direct materials of $300 per desk; and variable overhead of $60 per desk. It normally sells its desks at $600 each. Assuming that it does not have a capacity problem, what would be the effect on its profits if it accepted a special order to make an additional 100,000 desks for $400 each?