Question 1

Companies can more reliably estimate master-budget capacity utilization than normal capacity utilization.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is true of capacity costs?

Accepted Answer

A)  Capacity costs are difficult to estimate. 
B)  Capacity costs don't provide a useful planning tool for nonmanufacturing firms. 
C)  Capacity costs cannot be used with activity-based costing. 
D)  Capacity costs do not arise in the nonmanufacturing parts of the value chain. 
A)  Capacity costs are difficult to estimate. 
B)  Capacity costs don't provide a useful planning tool for nonmanufacturing firms. 
C)  Capacity costs cannot be used with activity-based costing. 
D)  Capacity costs do not arise in the nonmanufacturing parts of the value chain.

Question 3

Using practical capacity as the denominator level sets the cost of capacity at the cost of supplying the capacity,regardless of the demand for the capacity.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is a reason for companies adopting variable costing for internal reporting purposes?

Accepted Answer

A)  It is cost-effective to use variable costing for both internal and external reporting. 
B)  It reduces the incentives for undesirable buildup of inventories. 
C)  It measures the cost of all manufacturing resources, whether variable or fixed, necessary to produce inventory. 
D)  It assists in accurate pricing decisions in case of long-run pricing. 
A)  It is cost-effective to use variable costing for both internal and external reporting. 
B)  It reduces the incentives for undesirable buildup of inventories. 
C)  It measures the cost of all manufacturing resources, whether variable or fixed, necessary to produce inventory. 
D)  It assists in accurate pricing decisions in case of long-run pricing.

Question 5

Practical capacity is unattainable in the real world.

Accepted Answer

A) True 
 B)False

Question 6

Stiller Corporation incurred fixed manufacturing costs of $24,000 during 2015. Other information for 2015 includes:
The budgeted denominator level is 2,000 units.
Units produced total 1,500 units.
Units sold total 1,200 units.
Beginning inventory was zero.
The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold.
-Fixed manufacturing costs expensed on the income statement (excluding adjustments for variances)total ________.

Accepted Answer

A)  $14,400 
B)  $19,200 
C)  $24,000 
D)  0 
A)  $14,400 
B)  $19,200 
C)  $24,000 
D)  0

Question 7

Use of practical capacity results in an unrealistically small fixed manufacturing cost per unit because it is based on an idealistic and unattainable level of capacity.

Accepted Answer

A) True 
 B)False

Question 8

Absorption costing is also referred to as super-variable costing.

Accepted Answer

A) True 
 B)False

Question 9

Operating income reported on the end-of-period financial statements is changed when ________ is used to handle the production-volume variance at the end of the accounting period.

Accepted Answer

A)  the adjusted allocation-rate approach 
B)  the proration approach 
C)  the write-off variances to cost of goods sold approach 
D)  the reinstatement approach 
A)  the adjusted allocation-rate approach 
B)  the proration approach 
C)  the write-off variances to cost of goods sold approach 
D)  the reinstatement approach

Question 10

Absorption costing is the required inventory method for external financial reporting in most countries.

Accepted Answer

A) True 
 B)False

Question 11

The Internal Revenue Service requires the use of ________ for calculating fixed manufacturing costs per unit.

Accepted Answer

A)  practical capacity 
B)  theoretical capacity 
C)  master-budget capacity utilization 
D)  normal capacity utilization 
A)  practical capacity 
B)  theoretical capacity 
C)  master-budget capacity utilization 
D)  normal capacity utilization

Companies can more reliably estimate master-budget capacity utilization than normal capacity utilization.

Which of the following is true of capacity costs?

Using practical capacity as the denominator level sets the cost of capacity at the cost of supplying the capacity,regardless of the demand for the capacity.

Which of the following is a reason for companies adopting variable costing for internal reporting purposes?

Practical capacity is unattainable in the real world.

Use of practical capacity results in an unrealistically small fixed manufacturing cost per unit because it is based on an idealistic and unattainable level of capacity.

Absorption costing is also referred to as super-variable costing.

Operating income reported on the end-of-period financial statements is changed when ________ is used to handle the production-volume variance at the end of the accounting period.

Absorption costing is the required inventory method for external financial reporting in most countries.

The Internal Revenue Service requires the use of ________ for calculating fixed manufacturing costs per unit.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters

Exam 9: Inventory Costing and Capacity Analysis

Companies can more reliably estimate master-budget capacity utilization than normal capacity utilization.

Which of the following is true of capacity costs?

Using practical capacity as the denominator level sets the cost of capacity at the cost of supplying the capacity,regardless of the demand for the capacity.

Which of the following is a reason for companies adopting variable costing for internal reporting purposes?

Practical capacity is unattainable in the real world.

Use of practical capacity results in an unrealistically small fixed manufacturing cost per unit because it is based on an idealistic and unattainable level of capacity.

Absorption costing is also referred to as super-variable costing.

Operating income reported on the end-of-period financial statements is changed when ________ is used to handle the production-volume variance at the end of the accounting period.

Absorption costing is the required inventory method for external financial reporting in most countries.

The Internal Revenue Service requires the use of ________ for calculating fixed manufacturing costs per unit.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters