Multiple Choice
These are Tim's very unofficial answers. Please read the discussion on the forum.
| Question | My Answer | Correct answer | Notes |
|---|---|---|---|
| 1 | C | ZBB means "budget as if for the first time" | |
| 2 | A | ch 2 | |
| 3 | A | H p27 | |
| 4 | D | H p28 | |
| 5 | A | ||
| 6 | B | ||
| 7 | D | this is a tricky one. Answer A (Allocation) also involves assigning costs using some kind of averaging (the budget rate), but it does not necessarily mean that costs are allocated to similar products. Need to get John's input. I like D the best, though. See H p 95. | |
| 8 | B | C | This answer is on H p95 if you want to check. |
| 9 | C | 15*25,15*30,15*(25+30) | |
| 10 | B | Statement B is nonsense, or at least beyond my ken | |
| 11 | D | definition of normal costing | |
| 12 | C | if it is a direct cost, then we are not concerned with ABC, which helps with allocated costs | |
| 13 | D | H p135 | |
| 14 | D | H p136 | |
| 15 | B | ||
| 16 | A | see transaction 5 on H p 139 | |
| 17 | C | ||
| 18 | A | C | D: no, manuf. overhead ctl records actual costs.B is not true; only
the credit could occur as costs are incurred. C is a summary transaction.
H p138 transaction 2 and H p 139 transaction 5 |
| 19 | D | ||
| 20 | A |
| Question | Answer | Correct Answer | Notes |
|---|---|---|---|
| 21 | D | ratio is WIP, 5%; FinGood, 10%;COGS, 85% | |
| 22 | A and D | D | When (1) and (A) happen together, manufacturing costs will definitely
be over-allocated.
When (1) and (D) happen together, manufacturing costs will also definitely be over-allocated. If the question is read "... or (2)" then the correct answer would be D; D is a possible reason for over-allocation, depending on what happens with the actual cost-level. On its own, A would not cause over-allocation. On its own, (1) does not necessarily cause over-allocation. The only combination of events that guarantee over-allocation are (1) and (A) or (1) and (D). This question is ambiguous. There are two correct answers. Don't you hate that? |
| 23 | B | conversion costs include direct labor | |
| 24 | C | ||
| 25 | B | ||
| 26 | C | The other choices are not common sense. Also, see H p2 | |
| 27 | A | ||
| 28 | C | A | A is also correct in my opinion - without a sales forecast of some
kind, how else can a sales budget be prepared? On the other hand, you could
argue that the sales forecast is one of the steps of a sales budget. H
p 182 uses the two terms interchangeably.
B is not; the cash budget is not part of the operating budget. Same with D. |
| 29 | C | option B is tempting, except if you read it as "(direct materials)
and (supervision)", not "direct (materials and supervision)".
Supervision is usually an indirect type of cost (a manager may supervise several different jobs rather indirectly). And in any case, C is clearly not part of overhead. |
|
| 30 | C | H p 180. The cash budget is clearly not the final step. | |
| 31 | B | C | H p 189 (definition). |
| 32 | D | H p 189. B sounds tempting, but the nearest reference to "continuous budgeting" is continuous improvement budgeting, which is different to the approach of kaizen. Kaizen actually refers not to budgeting but to the overall approach of continuous improvement. | |
| 33 | D | C | See the study guide. Responsibility accounting is always about "who", never about "what". |
| 34 | D | Consider a favourable variance in COGS (less than budget)... because our sales are only 25% of budget. Ouch. | |
| 35 | B | ||
| 36 | A | ||
| 37 | A | I don't know what B and C are (as methods). D is wrong because if all direct costs are used that would include fixed direct costs, and therefore it can't be variable. | |
| 38 | B | ||
| 39 | B? | B | I'm not really sure of this. The perfect answer would be "fixed direct and indirect costs". |
| 40 | D | It's not A or B.
Under absorption costing, inventory levels defer fixed expenses. With a depletion of inventory, as seen in this question, more costs are transferred to COGS under absorption costing than under variable costing. Income is lower under absorption costing |
| Question | Answer | Correct Answer | Notes |
|---|---|---|---|
| 41 | D | ||
| 42 | B | ||
| 43 | A | consider that the company introduces two different production lines (each making one product). Factory insurance used to be a direct cost to the sole production line; now it needs to be allocated. | |
| 44 | C | See forum for a LONG discussion about this ... | |
| 45 | B | A | This question is a bit too ambiguous. What does "difference" mean?
Difference in dollars, or difference in ratio (assume dollars)? What does
"amount" mean? Dollar value, or proportion, or cost-driver (assume dollars)?
Instinctively: the direct cost method and the reciprocal are the most different. If one service department doubles the cost of its service to another service department but the cost of all the other services provided doesn't change (the situation in answer B), then under the direct cost approach, the operating department customers of the first service department bears the cost increase, but under the reciprocal cost approach, the operating department customers of the second department bear the cost increase. The difference between the two approaches must increase. |
| 46 | A | ||
| 47 | D | ||
| 48 | D | H p515, point 2 under Cost Drivers and Allocation Bases | |
| 49 | A | ||
| 50 | D | see relevant costs | |
| 51 | C | ||
| 52 | B | ||
| 53 | D | If "high" means in an absolute sense, there is no correlation at all.
Just because a product has a high value doesn't mean that it is expensive
to produce. If high means relative to the other joint products, it doesn't
follow either, since the allocation method may be based on a physical measure,
not on value.
Anyway, see H p 553 if you don't believe me. |
|
| 54 | A | ||
| 55 | A | H p 550 | |
| 56 | B | H p 555 | |
| 57 | B | ||
| 58 | D | ||
| 59 | C | It is an expense (so income statement), but management should monitor it | |
| 60 | D | ||
| 61 | B | normal spoilage is part of the production process, so the product cost
should include it (inventoried).
But this is not true of abnormal spoilage: it is an expense. |
|
| 62 | D | ||
| 63 | B | ||
| 64 | A | ||
| 65 | C | Just-in-time aims for multi-skilled employees: the classic example is a machine operator who is also capable of basic maintanance during quiet times. | |
| 66 | C | ||
| 67 | D | ||
| 68 | C | ||
| 69 | C | D | according to H p 693, but according to H p 795 it should be A I think. Another one for John. |
| 70 | A |