Deck 11: Reporting for Control

Question 1

Which of the following is NOT an operating asset?

A) Cash.
B) Inventory.
C) Plant equipment.
D) Common shares.

Answer 1

D

Question 2

Ieso Company has two stores: J and K. During November, Ieso Company reported operating income of $30,000 and sales of $450,000. The contribution margin in Store J was $100,000, or 40% of sales. The segment margin in Store K was $30,000, or 15% of sales. Traceable fixed expenses were $60,000 in Store J, and $40,000 in Store K.

-What were the total variable expenses in Store K?

A) $70,000.
B) $110,000.
C) $130,000.
D) $200,000.

Answer 2

$130,000.

Question 3

Ieso Company has two stores: J and K. During November, Ieso Company reported operating income of $30,000 and sales of $450,000. The contribution margin in Store J was $100,000, or 40% of sales. The segment margin in Store K was $30,000, or 15% of sales. Traceable fixed expenses were $60,000 in Store J, and $40,000 in Store K.

-What was the segment margin ratio in Store J?

A) 16%.
B) 24%.
C) 40%.
D) 60%.

Answer 3

16%.

Question 4

Ieso Company has two stores: J and K. During November, Ieso Company reported operating income of $30,000 and sales of $450,000. The contribution margin in Store J was $100,000, or 40% of sales. The segment margin in Store K was $30,000, or 15% of sales. Traceable fixed expenses were $60,000 in Store J, and $40,000 in Store K.

-What were the total sales in Store J?

A) $100,000.
B) $150,000.
C) $250,000.
D) $400,000.

Question 5

All other things being equal,which of the following is a consequence of an increase in a division's traceable fixed expenses?

A) The division's contribution margin ratio will decrease.
B) The division's segment margin ratio will remain the same.
C) The division's segment margin will decrease.
D) The overall company operating income will remain the same.

Question 6

Which of the following is the numerator in the calculation of the turnover component of ROI?

A) Invested capital.
B) Total assets.
C) Operating income.
D) Sales.

Question 7

Ieso Company has two stores: J and K. During November, Ieso Company reported operating income of $30,000 and sales of $450,000. The contribution margin in Store J was $100,000, or 40% of sales. The segment margin in Store K was $30,000, or 15% of sales. Traceable fixed expenses were $60,000 in Store J, and $40,000 in Store K.

-What were Ieso Company's total fixed expenses for the year?

A) $40,000.
B) $100,000.
C) $140,000.
D) $170,000.

Question 8

All other things equal,a company's return on investment is affected by a change in which of the following?
$\begin{array}{|l|l|}\hline \text { Turnover } & \text { Margin } \\\hline & \\\hline \text { A) Yes } & \text { Yes } \\\hline \text { B) No } & \text { Yes } \\\hline \text { C) No } & \text { No } \\\hline \text { D) Yes } & \text { No } \\\hline\end{array}$

A) Option A
B) Option B
C) Option C
D) Option D

Question 9

Canon Company has two sales areas: North and South. During last year, the contribution margin in the North was $50,000, or 20% of sales. The segment margin in the South was $15,000, or 8% of sales. Traceable fixed costs were $15,000 in the North and $10,000 in the South. During last year, the company reported total operating income of $26,000.



-What were the variable costs for the South area for the year?

A) $65,000.
B) $162,500.
C) $185,000.
D) $230,000.

Question 10

Canon Company has two sales areas: North and South. During last year, the contribution margin in the North was $50,000, or 20% of sales. The segment margin in the South was $15,000, or 8% of sales. Traceable fixed costs were $15,000 in the North and $10,000 in the South. During last year, the company reported total operating income of $26,000.



-What were the total fixed costs (traceable and common)for Canon Company for the year?

A) $24,000.
B) $25,000.
C) $49,000.
D) $50,000.

Question 11

Which of the following statements provide(s)an argument in favour of including only a plant's net book value rather than gross book value as part of operating assets in the ROI computation?
I)Net book value is consistent with how plant and equipment items are reported on a balance sheet.
II)Net book value is consistent with the computation of operating income,which includes amortization as an operating expense.
III)Net book value allows ROI to decrease over time as assets get older.

A) I only.
B) III only.
C) I and II only.
D) I and III only.

Question 12

Assuming that sales and operating income remain the same,which of the following statements about a company's return on investment is correct?

A) It will increase if operating assets increase.
B) It will decrease if operating assets decrease.
C) It will decrease if turnover decreases.
D) It will decrease if turnover increases.

Question 13

What would be a good example of a common cost that normally could NOT be assigned to products on a segmented income statement except on an arbitrary basis?

A) Product advertising outlays.
B) Salary of a corporation president.
C) Direct materials.
D) The product manager's salary.

Question 14

Divisions A and B of Denner Company reported the following results for October:
$\begin{array}{|l|r|r|}\hline & \text { Division A } & \text { Division B } \\\hline \text { Sales } & \$ 90,000 & \$ 150,000 \\\hline \text { Variable Expenses as a } & 70 \% & 60 \% \\\text { Percentage of Sales } & \\\hline \text { Segment Margin } & \$ 2,000 & \$ 23,000 \\\hline\end{array}$
If common fixed expenses were $31,000,what were the total fixed expenses?

A) $31,000.
B) $52,000.
C) $62,000.
D) $93,000.

Question 15

During April,Division D of Carney Company had a segment margin ratio of 15%,a variable expense ratio of 60% of sales,and traceable fixed expenses of $15,000.Division D's sales were closest to which of the following?

A) $22,500.
B) $33,333.
C) $60,000.
D) $100,000.

Question 16

Which of the following is a correct definition of operating income?

A) Sales minus variable expenses.
B) Sales minus variable expenses and traceable fixed expenses.
C) Contribution margin minus traceable and common fixed expenses.
D) Income before interest and taxes (EBIT).

Question 17

All other things equal,which of the following events would generally cause an increase in a company's return on investment (ROI)?

A) An increase in average operating assets.
B) A decrease in sales.
C) A decrease in operating expenses.
D) An increase in operating expenses.

Question 18

In computing the margin in a ROI analysis,which of the following is used?

A) Sales in the denominator.
B) Operating income in the denominator.
C) Average operating assets in the denominator.
D) Residual income in the denominator.

Question 19

More Company has two divisions: L and M.During July,the contribution margin in Division L was $60,000.The contribution margin ratio in Division M was 40%,and its sales were $250,000.Division M's segment margin was $60,000.The common fixed expenses were $50,000,and the company operating income was $20,000.What was the segment margin for Division L?

A) $0.
B) $10,000.
C) $50,000.
D) $60,000.

Question 20

How is a company's return on investment calculated?

A) Dividing the margin by the turnover.
B) Multiplying the margin by the turnover.
C) Dividing the turnover by the average operating assets.
D) Multiplying the turnover by the average operating assets.

Question 21

Effective decentralization is essential for which of the following management accounting practices in organizations?

A) Break-even analysis.
B) Product costing.
C) Segment reporting.
D) Activity-based costing.

Question 22

Which of the following would be classified as an appraisal cost on a quality cost report?

A) Supervision of testing and inspection activities.
B) Systems development.
C) Quality engineering.
D) Quality training.

Question 23

Which of the following would be classified as a prevention cost on a quality cost report?

A) Re-entering data because of keying errors.
B) Rework labour and overhead.
C) Net cost of scrap.
D) Technical support provided to suppliers.

Question 24

An increase in appraisal costs will usually result in an increase in which of the following?

A) Prevention costs.
B) Internal failure costs.
C) External failure costs.
D) Opportunity costs.

Question 25

Consider the following three statements:
I)A profit centre has control over both cost and revenue.
II)An investment centre has control over invested funds,but not over costs and revenue.
III)A cost centre has no control over sales.
Which statement(s)is/are correct?

A) I only.
B) II only.
C) I and III only.
D) I and II only.

Question 26

Which of the following best describes a segment of a business responsible for both revenues and costs?

A) A cost centre.
B) An investment centre.
C) A profit centre.
D) A residual income centre.

Question 27

Which of the following statements about the step-down method of allocating service department is correct?

A) It is a less accurate method of allocation than the direct method.
B) It cannot be used when a company has more than two service departments.
C) It is a simpler allocation than the direct method.
D) It ignores some interdepartmental services.

Question 28

Which of the following would be classified as an appraisal cost on a quality cost report?

A) Returns and allowances arising from quality problems.
B) Downtime caused by quality problems.
C) Test and inspection of in-process goods.
D) Cost of field servicing and handling complaints.

Question 29

Which of the following would be classified as a prevention cost on a quality cost report?

A) Lost sales arising from a reputation for poor quality.
B) Final product testing and inspection.
C) Net cost of spoilage.
D) Quality data gathering, analysis, and reporting.

Question 30

Which of the following statements about reciprocal service department costs is correct?

A) They are allocated to producing departments under the direct method but not allocated to producing departments at all under the step-down method.
B) They are allocated to producing departments under the step-down method but not allocated to producing departments at all under the direct method.
C) They are not allocated to producing departments under either the direct or the step-down methods.
D) They are allocated to producing departments under both the direct and step-down methods.

Question 31

When the selling division in an internal transfer has unsatisfied demand from outside customers for the product that is being transferred,what is the lowest acceptable transfer price as far as the selling division is concerned?

A) Variable cost of producing a unit of product.
B) The full absorption cost of producing a unit of product.
C) The market price charged to outside customers, less any costs saved by transferring internally.
D) The amount that the purchasing division would have to pay an outside seller to acquire a similar product for its use.

Question 32

Which of the following would be classified as a prevention cost on a quality cost report?

A) Cost of field servicing and handling complaints.
B) Warranty repairs and replacements.
C) Systems development.
D) Rework labour and overhead.

Question 33

Parker Company has two service departments-cafeteria and engineering-and two operating departments.The number of employees in each department is given below:
$\begin{array}{|l|r|}\hline \text { Cafeteria } & 10 \\\hline \text { Engineering } & 40 \\\hline \text { Operating Department 1 } & 500 \\\hline \text { Operating Department 2 } & 200 \\\hline\end{array}$
The costs of the Cafeteria are allocated to other departments on the basis of the number of employees in the departments.If these costs are budgeted at $69,375,what would be the amount of cost allocated to Engineering under the direct method?

A) $0.
B) $3,700.
C) $3,750.
D) $17,344.

Question 34

The performance of the manager of Division A is evaluated by residual income.Which of the following would improve the manager's performance?

A) Increase in average operating assets.
B) Decrease in average operating assets.
C) Increase in minimum required return.
D) Decrease in operating income.

Question 35

Which of the following statements about quality costs is correct?

A) They relate only to the manufacturing process.
B) They should be focused on appraisal activities.
C) They are minimized by having a team of well-trained quality control inspectors.
D) They cut across departmental lines and often are not accumulated and reported to management.

Question 36

Boa Corp.uses the direct method to allocate service department overhead costs to operating departments.Information for the month of June follows:
$\begin{array}{|l|r|r|} \hline& \begin{array}{r}\text { Service } \\\text { Maintenance }\end{array} & \text { Departments Utilities } \\\hline \text { Departmental cost incurred } & \$ 20,000 & \$ 10,000 \\\hline \text { Service provided to departments: } & & \\\hline \text { Maintenance } & & 10 \% \\\hline \text { Utilities } & 20 \% & \\\hline \text { Operating - A } & 40 \% & 30 \% \\\hline \text { Operating - B } & 40 \% &60 \% \\\hline\end{array}$
What would be the amount of maintenance department costs allocated to Operating Department A for June?

A) $8,000.
B) $8,800.
C) $10,000.
D) $20,000.

Question 37

What allocation method recognizes that service departments often provide each other with interdepartmental services,and it is therefore considered to be the most accurate method for allocating service department costs to operating departments?

A) The direct method.
B) The step-down method.
C) The reciprocal method.
D) The allocation by cost behaviour method.

Question 38

Grant Company has several service departments that provide services to each other as well as to operating departments within the company.Which method would be least accurate in allocating the company's service department costs?

A) The sequential method.
B) The direct method.
C) The step-down method.
D) The reciprocal method.

Question 39

Delmar Corporation is considering the use of residual income as a measure of the performance of its divisions.What major disadvantage of this method should the company consider before deciding to institute it?

A) This method does not make allowance for difference in the size of compared divisions.
B) Opportunities may be undertaken that will decrease the overall return on investment.
C) The minimum required rate of return may eliminate desirable opportunities from consideration.
D) Residual income does not measure how effectively the division manager controls costs.

Question 40

Suppose a manager's performance is to be evaluated by residual income.Which of the following will NOT result in an increase in the residual income figure for this manager,assuming other factors remain constant?

A) An increase in sales.
B) An increase in the minimum required rate of return.
C) A decrease in expenses.
D) A decrease in operating assets.

Question 41

$\begin{array}{l}\text { Eagan Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Quality training } & \$ 75,000 \\\hline \text { Lost sales due to poor quality } & \$ 94,000 \\\hline \text { Test and inspection of in-process goods } & \$ 37,000 \\\hline \text { Test and inspection of incoming materials } & \$ 65,000 \\\hline \text { Disposal of defective products } & \$ 86,000 \\\hline \text { Quality data gathering, analysis, and reporting } & \$ 92,000 \\\hline \text { Net cost of spoilage } & \$ 27,000 \\\hline \text { Supervision of testing and inspection activities } & \$ 10,000 \\\hline \text { Product recalls } & \$ 38,000 \\\hline\end{array}\end{array}$

- What will be the total internal failure cost appearing on the quality cost report?

A) $64,000.
B) $113,000.
C) $121,000.
D) $124,000.

Question 42

Which of the following would be classified as an internal failure cost on a quality cost report?

A) Rework labour and overhead.
B) Technical support provided to suppliers.
C) Quality improvement projects.
D) Systems development.

Question 43

$\begin{array}{l}\text { Eade Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Systems development } & \$ 32,000 \\\hline \text { Final product testing and inspection } & \$ 13,000 \\\hline \text { Quality data gathering, analysis, and reporting } & \$ 11,000 \\\hline \text { Net cost of scrap } & \$ 62,000 \\\hline \text { Returns arising from quality problems } & \$ 59,000 \\\hline \text { Amortization of test equipment } & \$ 57,000 \\\hline \text { Rework labour and overhead } & \$ 18,000 \\\hline \text { Test and inspection of incoming materials } & \$ 40,000 \\\hline \text { Product recalls } & \$ 36,000 \\\hline\end{array}\end{array}$

- What will be the total external failure cost appearing on the quality cost report?

A) $54,000.
B) $95,000.
C) $175,000.
D) $328,000.

Question 44

Which of the following would be classified as an external failure cost on a quality cost report?

A) Amortization of test equipment.
B) Test and inspection of in-process goods.
C) Test and inspection of incoming materials.
D) Warranty repairs and replacements.

Question 45

$\begin{array}{l}\text { Eagan Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Quality training } & \$ 75,000 \\\hline \text { Lost sales due to poor quality } & \$ 94,000 \\\hline \text { Test and inspection of in-process goods } & \$ 37,000 \\\hline \text { Test and inspection of incoming materials } & \$ 65,000 \\\hline \text { Disposal of defective products } & \$ 86,000 \\\hline \text { Quality data gathering, analysis, and reporting } & \$ 92,000 \\\hline \text { Net cost of spoilage } & \$ 27,000 \\\hline \text { Supervision of testing and inspection activities } & \$ 10,000 \\\hline \text { Product recalls } & \$ 38,000 \\\hline\end{array}\end{array}$

- What will be the total external failure cost appearing on the quality cost report?

A) $124,000.
B) $132,000.
C) $245,000.
D) $524,000.

Question 46

$\begin{array}{l}\text { Eagan Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Quality training } & \$ 75,000 \\\hline \text { Lost sales due to poor quality } & \$ 94,000 \\\hline \text { Test and inspection of in-process goods } & \$ 37,000 \\\hline \text { Test and inspection of incoming materials } & \$ 65,000 \\\hline \text { Disposal of defective products } & \$ 86,000 \\\hline \text { Quality data gathering, analysis, and reporting } & \$ 92,000 \\\hline \text { Net cost of spoilage } & \$ 27,000 \\\hline \text { Supervision of testing and inspection activities } & \$ 10,000 \\\hline \text { Product recalls } & \$ 38,000 \\\hline\end{array}\end{array}$

- What will be the total prevention cost appearing on the quality cost report?

A) $102,000.
B) $112,000.
C) $130,000.
D) $167,000.

Question 47

$\begin{array}{l}\text { Eade Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Systems development } & \$ 32,000 \\\hline \text { Final product testing and inspection } & \$ 13,000 \\\hline \text { Quality data gathering, analysis, and reporting } & \$ 11,000 \\\hline \text { Net cost of scrap } & \$ 62,000 \\\hline \text { Returns arising from quality problems } & \$ 59,000 \\\hline \text { Amortization of test equipment } & \$ 57,000 \\\hline \text { Rework labour and overhead } & \$ 18,000 \\\hline \text { Test and inspection of incoming materials } & \$ 40,000 \\\hline \text { Product recalls } & \$ 36,000 \\\hline\end{array}\end{array}$

- What will be the total appraisal cost appearing on the quality cost report?

A) $70,000.
B) $97,000.
C) $110,000.
D) $119,000.

Question 48

$\text { Eacker Company's quality cost report is to be based on the following data: }$
$\begin{array}{|l|r|}\hline \text { Quality engineering } & \$ 72,000 \\\hline \text { Net cost of spoilage } & \$ 70,000 \\\hline \text { Re-entering data because of keying errors } & \$ 88,000 \\\hline \text { Test and inspection of incoming materials } & \$ 68,000 \\\hline \text { Test and inspection of in-process goods } & \$ 97,000 \\\hline \text { Technical support provided to suppliers } & \$ 83,000 \\\hline \text { Maintenance of test equipment } & \$ 31,000 \\\hline \text { Product recalls } & \$ 73,000 \\\hline \text { Warranty repairs and replacements } & \$ 46,000 \\\hline\end{array}$

- What will be the total external failure cost appearing on the quality cost report?

A) $119,000.
B) $143,000.
C) $277,000.
D) $628,000.

Question 49

Which of the following would be classified as an internal failure cost on a quality cost report?

A) Supplies used in testing and inspection.
B) Final product testing and inspection.
C) Net cost of scrap.
D) Amortization of test equipment.

Question 50

Which of the following would be classified as an external failure cost on a quality cost report?

A) Product recalls.
B) Quality engineering.
C) Quality training.
D) Systems development.

Question 51

$\begin{array}{l}\text { Eade Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Systems development } & \$ 32,000 \\\hline \text { Final product testing and inspection } & \$ 13,000 \\\hline \text { Quality data gathering, analysis, and reporting } & \$ 11,000 \\\hline \text { Net cost of scrap } & \$ 62,000 \\\hline \text { Returns arising from quality problems } & \$ 59,000 \\\hline \text { Amortization of test equipment } & \$ 57,000 \\\hline \text { Rework labour and overhead } & \$ 18,000 \\\hline \text { Test and inspection of incoming materials } & \$ 40,000 \\\hline \text { Product recalls } & \$ 36,000 \\\hline\end{array}\end{array}$

- What will be the total internal failure cost appearing on the quality cost report?

A) $54,000.
B) $75,000.
C) $80,000.
D) $121,000.

Question 52

$\text { Eacker Company's quality cost report is to be based on the following data: }$
$\begin{array}{|l|r|}\hline \text { Quality engineering } & \$ 72,000 \\\hline \text { Net cost of spoilage } & \$ 70,000 \\\hline \text { Re-entering data because of keying errors } & \$ 88,000 \\\hline \text { Test and inspection of incoming materials } & \$ 68,000 \\\hline \text { Test and inspection of in-process goods } & \$ 97,000 \\\hline \text { Technical support provided to suppliers } & \$ 83,000 \\\hline \text { Maintenance of test equipment } & \$ 31,000 \\\hline \text { Product recalls } & \$ 73,000 \\\hline \text { Warranty repairs and replacements } & \$ 46,000 \\\hline\end{array}$

- What will be the total prevention cost appearing on the quality cost report?

A) $103,000.
B) $145,000.
C) $151,000.
D) $155,000.

Question 53

$\begin{array}{l}\text { Eade Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Systems development } & \$ 32,000 \\\hline \text { Final product testing and inspection } & \$ 13,000 \\\hline \text { Quality data gathering, analysis, and reporting } & \$ 11,000 \\\hline \text { Net cost of scrap } & \$ 62,000 \\\hline \text { Returns arising from quality problems } & \$ 59,000 \\\hline \text { Amortization of test equipment } & \$ 57,000 \\\hline \text { Rework labour and overhead } & \$ 18,000 \\\hline \text { Test and inspection of incoming materials } & \$ 40,000 \\\hline \text { Product recalls } & \$ 36,000 \\\hline\end{array}\end{array}$

- What will be the total prevention cost appearing on the quality cost report?

A) $43,000.
B) $45,000.
C) $47,000.
D) $51,000.

Question 54

$\begin{array}{l}\text { Faast Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Quality engineering } & \$ 86,000 \\\hline \text { Quality circles } & \$ 53,000 \\\hline \text { Supervision of testing and inspection activities } & \$ 92,000 \\\hline \text { Net cost of scrap } & \$ 96,000 \\\hline \text { Test and inspection of in-process goods } & \$ 16,000 \\\hline \text { Liability arising from defective products } & \$ 13,000 \\\hline \text { Warranty repairs and replacements } & \$ 62,000 \\\hline \text { Debugging software errors } & \$ 86,000 \\\hline \text { Rework labour and overhead } & \$ 29,000 \\\hline\end{array}\end{array}$

- What will be the total prevention cost appearing on the quality cost report?

A) $69,000.
B) $139,000.
C) $148,000.
D) $178,000.

Question 55

$\text { Eacker Company's quality cost report is to be based on the following data: }$
$\begin{array}{|l|r|}\hline \text { Quality engineering } & \$ 72,000 \\\hline \text { Net cost of spoilage } & \$ 70,000 \\\hline \text { Re-entering data because of keying errors } & \$ 88,000 \\\hline \text { Test and inspection of incoming materials } & \$ 68,000 \\\hline \text { Test and inspection of in-process goods } & \$ 97,000 \\\hline \text { Technical support provided to suppliers } & \$ 83,000 \\\hline \text { Maintenance of test equipment } & \$ 31,000 \\\hline \text { Product recalls } & \$ 73,000 \\\hline \text { Warranty repairs and replacements } & \$ 46,000 \\\hline\end{array}$

- What will be the total appraisal cost appearing on the quality cost report?

A) $128,000.
B) $165,000.
C) $185,000.
D) $196,000.

Question 56

$\begin{array}{l}\text { Eagan Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Quality training } & \$ 75,000 \\\hline \text { Lost sales due to poor quality } & \$ 94,000 \\\hline \text { Test and inspection of in-process goods } & \$ 37,000 \\\hline \text { Test and inspection of incoming materials } & \$ 65,000 \\\hline \text { Disposal of defective products } & \$ 86,000 \\\hline \text { Quality data gathering, analysis, and reporting } & \$ 92,000 \\\hline \text { Net cost of spoilage } & \$ 27,000 \\\hline \text { Supervision of testing and inspection activities } & \$ 10,000 \\\hline \text { Product recalls } & \$ 38,000 \\\hline\end{array}\end{array}$

- What will be the total appraisal cost appearing on the quality cost report?

A) $75,000.
B) $92,000.
C) $102,000.
D) $112,000.

Question 57

Which of the following would be classified as an appraisal cost on a quality cost report?

A) Quality circles.
B) Downtime caused by quality problems.
C) Supplies used in testing and inspection.
D) Quality engineering.

Question 58

Which of the following would be classified as an external failure cost on a quality cost report?

A) Quality training.
B) Systems development.
C) Repairs and replacements beyond the warranty period.
D) Quality engineering.

Question 59

$\text { Eacker Company's quality cost report is to be based on the following data: }$
$\begin{array}{|l|r|}\hline \text { Quality engineering } & \$ 72,000 \\\hline \text { Net cost of spoilage } & \$ 70,000 \\\hline \text { Re-entering data because of keying errors } & \$ 88,000 \\\hline \text { Test and inspection of incoming materials } & \$ 68,000 \\\hline \text { Test and inspection of in-process goods } & \$ 97,000 \\\hline \text { Technical support provided to suppliers } & \$ 83,000 \\\hline \text { Maintenance of test equipment } & \$ 31,000 \\\hline \text { Product recalls } & \$ 73,000 \\\hline \text { Warranty repairs and replacements } & \$ 46,000 \\\hline\end{array}$

- What will be the total internal failure cost appearing on the quality cost report?

A) $134,000.
B) $143,000.
C) $150,000.
D) $158,000.

Question 60

Which of the following would be classified as an internal failure cost on a quality cost report?

A) Re-entering data because of keying errors.
B) Final product testing and inspection.
C) Supplies used in testing and inspection.
D) Amortization of test equipment.

Question 61

Westmore Company has two Service Departments and two Operating Departments. Budgeted costs and other data relating to these departments are presented below: $\begin{array} { | l | r | r | r | r | } \hline & \begin{array} { r } \text { Building \& } \\\text { Grounds }\end{array} & \text { Personnel } & \text { Operating A} & \text { Operating B } \\\hline \text { Departmental costs } & \$ 54,000 & \$ 200,000 & \$ 650,000 & \$ 800,000 \\\hline \text { Square Metres Occupied } & 1,000 & 3,000 & 12,000 & 15,000 \\\hline \text { Number of Employees } & 10 & 5 & 45 & 55 \\\hline \text { Direct Labour Hours } & & & 76,000 & 92,000 \\\hline\end{array}$ The costs of Building & Grounds are allocated first on the basis of square metres of space occupied. Personnel costs are allocated on the basis of number of employees. The departmental costs for the Operating Departments are overhead costs. Predetermined overhead rates in the Operating Departments are calculated on the basis of direct labour hours.




- Assume again that the company uses the step-down method.What would be the total amount of cost allocated from the two Service Departments to the Operating Departments for the year?

A) $254,000.
B) $850,000.
C) $1,450,000.
D) $1,704,000.

Question 62

$\begin{array}{l}\text { Faust Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Quality engineering } & \$ 68,000 \\\hline \text { Quality circles } & \$ 35,000 \\\hline \text { Supervision of testing and inspection activities } & \$ 72,000 \\\hline \text { Net cost of scrap } & \$ 76,000 \\\hline \text { Test and inspection of in-process goods } & \$ 6,000 \\\hline \text { Liability arising from defective products } & \$ 3,000 \\\hline \text { Warranty repairs and replacements } & \$ 56,000 \\\hline \text { Debugging software errors } & \$ 68,000 \\\hline \text { Rework labour and overhead } & \$ 19,000 \\\hline\end{array}\end{array}$

- What will be the total appraisal cost appearing on the quality cost report?

A) $74,000.
B) $78,000.
C) $81,000.
D) $181,000.

Question 63

$\begin{array}{l}\text { Thais Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Liability arising from defective products } & \$ 65,000 \\\hline \text { Lost sales due to poor quality } & \$ 61,000 \\\hline \text { Test and inspection of in-process goods } & \$ 57,000 \\\hline \text { Quality circles } & \$ 27,000 \\\hline \text { Net cost of spoilage } & \$ 103,000 \\\hline \text { Debugging software errors } & \$ 39,000 \\\hline \text { Rework labour and overhead } & \$ 105,000 \\\hline \text { Final product testing and inspection } & \$ 42,000 \\\hline \text { Statistical process control activities } & \$ 71,000 \\\hline\end{array}\end{array}$

- What will be the total prevention cost appearing on the quality cost report?

A) $84,000.
B) $92,000.
C) $98,000.
D) $113,000.

Question 64

$\begin{array}{l}\text { Faast Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Quality engineering } & \$ 86,000 \\\hline \text { Quality circles } & \$ 53,000 \\\hline \text { Supervision of testing and inspection activities } & \$ 92,000 \\\hline \text { Net cost of scrap } & \$ 96,000 \\\hline \text { Test and inspection of in-process goods } & \$ 16,000 \\\hline \text { Liability arising from defective products } & \$ 13,000 \\\hline \text { Warranty repairs and replacements } & \$ 62,000 \\\hline \text { Debugging software errors } & \$ 86,000 \\\hline \text { Rework labour and overhead } & \$ 29,000 \\\hline\end{array}\end{array}$

- What will be the total external failure cost appearing on the quality cost report?

A) $75,000.
B) $109,000.
C) $286,000.
D) $533,000.

Question 65

Westmore Company has two Service Departments and two Operating Departments. Budgeted costs and other data relating to these departments are presented below: $\begin{array} { | l | r | r | r | r | } \hline & \begin{array} { r } \text { Building \& } \\\text { Grounds }\end{array} & \text { Personnel } & \text { Operating A} & \text { Operating B } \\\hline \text { Departmental costs } & \$ 54,000 & \$ 200,000 & \$ 650,000 & \$ 800,000 \\\hline \text { Square Metres Occupied } & 1,000 & 3,000 & 12,000 & 15,000 \\\hline \text { Number of Employees } & 10 & 5 & 45 & 55 \\\hline \text { Direct Labour Hours } & & & 76,000 & 92,000 \\\hline\end{array}$ The costs of Building & Grounds are allocated first on the basis of square metres of space occupied. Personnel costs are allocated on the basis of number of employees. The departmental costs for the Operating Departments are overhead costs. Predetermined overhead rates in the Operating Departments are calculated on the basis of direct labour hours.




- Assume that the company uses the step-down method of allocating Service Department costs to Operating Departments,and Building and Grounds costs are allocated first.How much Personnel Department cost would be allocated to Operating Department A?

A) $0.
B) $90,000.
C) $92,430.
D) $205,400.

Question 66

$\begin{array}{l}\text { Faast Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Quality engineering } & \$ 86,000 \\\hline \text { Quality circles } & \$ 53,000 \\\hline \text { Supervision of testing and inspection activities } & \$ 92,000 \\\hline \text { Net cost of scrap } & \$ 96,000 \\\hline \text { Test and inspection of in-process goods } & \$ 16,000 \\\hline \text { Liability arising from defective products } & \$ 13,000 \\\hline \text { Warranty repairs and replacements } & \$ 62,000 \\\hline \text { Debugging software errors } & \$ 86,000 \\\hline \text { Rework labour and overhead } & \$ 29,000 \\\hline\end{array}\end{array}$

- What will be the total internal failure cost appearing on the quality cost report?

A) $99,000.
B) $102,000.
C) $158,000.
D) $211,000.

Question 67

$\begin{array}{l}\text { Fabri Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Liability arising from defective products } & \$ 56,000 \\\hline \text { Lost sales due to poor quality } & \$ 51,000 \\\hline \text { Test and inspection of in-process goods } & \$ 47,000 \\\hline \text { Quality circles } & \$ 17,000 \\\hline \text { Net cost of spoilage } & \$ 93,000 \\\hline \text { Debugging software errors } & \$ 29,000 \\\hline \text { Rework labour and overhead } & \$ 95,000 \\\hline \text { Final product testing and inspection } & \$ 32,000 \\\hline \text { Statistical process control activities } & \$ 61,000 \\\hline\end{array}\end{array}$

- What will be the total external failure cost appearing on the quality cost report?

A) $80,000.
B) $107,000.
C) $324,000.
D) $481,000.

Question 68

$\begin{array}{l}\text { Fabri Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Liability arising from defective products } & \$ 56,000 \\\hline \text { Lost sales due to poor quality } & \$ 51,000 \\\hline \text { Test and inspection of in-process goods } & \$ 47,000 \\\hline \text { Quality circles } & \$ 17,000 \\\hline \text { Net cost of spoilage } & \$ 93,000 \\\hline \text { Debugging software errors } & \$ 29,000 \\\hline \text { Rework labour and overhead } & \$ 95,000 \\\hline \text { Final product testing and inspection } & \$ 32,000 \\\hline \text { Statistical process control activities } & \$ 61,000 \\\hline\end{array}\end{array}$

- What will be the total appraisal cost appearing on the quality cost report?

A) $79,000.
B) $127,000.
C) $140,000.
D) $157,000.

Question 69

Westmore Company has two Service Departments and two Operating Departments. Budgeted costs and other data relating to these departments are presented below: $\begin{array} { | l | r | r | r | r | } \hline & \begin{array} { r } \text { Building \& } \\\text { Grounds }\end{array} & \text { Personnel } & \text { Operating A} & \text { Operating B } \\\hline \text { Departmental costs } & \$ 54,000 & \$ 200,000 & \$ 650,000 & \$ 800,000 \\\hline \text { Square Metres Occupied } & 1,000 & 3,000 & 12,000 & 15,000 \\\hline \text { Number of Employees } & 10 & 5 & 45 & 55 \\\hline \text { Direct Labour Hours } & & & 76,000 & 92,000 \\\hline\end{array}$ The costs of Building & Grounds are allocated first on the basis of square metres of space occupied. Personnel costs are allocated on the basis of number of employees. The departmental costs for the Operating Departments are overhead costs. Predetermined overhead rates in the Operating Departments are calculated on the basis of direct labour hours.




- Assume that the company uses the direct method of allocating Service Department costs to Operating Departments.How much Building & Grounds cost would be allocated to Operating Department A?

A) $20,903.
B) $21,600.
C) $24,000.
D) $29,700.

Question 70

$\begin{array}{l}\text { Faust Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Quality engineering } & \$ 68,000 \\\hline \text { Quality circles } & \$ 35,000 \\\hline \text { Supervision of testing and inspection activities } & \$ 72,000 \\\hline \text { Net cost of scrap } & \$ 76,000 \\\hline \text { Test and inspection of in-process goods } & \$ 6,000 \\\hline \text { Liability arising from defective products } & \$ 3,000 \\\hline \text { Warranty repairs and replacements } & \$ 56,000 \\\hline \text { Debugging software errors } & \$ 68,000 \\\hline \text { Rework labour and overhead } & \$ 19,000 \\\hline\end{array}\end{array}$

- What will be the total prevention cost appearing on the quality cost report?

A) $41,000.
B) $103,000.
C) $107,000.
D) $140,000.

Question 71

The following data are available for the South Division of Redride Products,Inc.and the single product it makes:
$\begin{array}{|l|r|}\hline \text { Unit Selling Price } & \$ 20 \\\hline \text { Variable Cost per Unit } & \$ 12 \\\hline \text { Annual Fixed Costs } & \$ 280,000 \\\hline \text { Average Operating Assets } & \$ 1,500,000 \\\hline\end{array}$
How many units must South sell each year to have an ROI of 16%?

A) 52,000 units.
B) 65,000 units.
C) 240,000 units.
D) 1,300,000 units.

Question 72

$\begin{array}{l}\text { Thais Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Liability arising from defective products } & \$ 65,000 \\\hline \text { Lost sales due to poor quality } & \$ 61,000 \\\hline \text { Test and inspection of in-process goods } & \$ 57,000 \\\hline \text { Quality circles } & \$ 27,000 \\\hline \text { Net cost of spoilage } & \$ 103,000 \\\hline \text { Debugging software errors } & \$ 39,000 \\\hline \text { Rework labour and overhead } & \$ 105,000 \\\hline \text { Final product testing and inspection } & \$ 42,000 \\\hline \text { Statistical process control activities } & \$ 71,000 \\\hline\end{array}\end{array}$

- What will be the total appraisal cost appearing on the quality cost report?

A) $99,000.
B) $155,000.
C) $170,000.
D) $197,000.

Question 73

$\begin{array}{l}\text { Thais Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Liability arising from defective products } & \$ 65,000 \\\hline \text { Lost sales due to poor quality } & \$ 61,000 \\\hline \text { Test and inspection of in-process goods } & \$ 57,000 \\\hline \text { Quality circles } & \$ 27,000 \\\hline \text { Net cost of spoilage } & \$ 103,000 \\\hline \text { Debugging software errors } & \$ 39,000 \\\hline \text { Rework labour and overhead } & \$ 105,000 \\\hline \text { Final product testing and inspection } & \$ 42,000 \\\hline \text { Statistical process control activities } & \$ 71,000 \\\hline\end{array}\end{array}$

- What will be the total internal failure cost appearing on the quality cost report?

A) $104,000.
B) $147,000.
C) $166,000.
D) $247,000.

Question 74

$\begin{array}{l}\text { Faust Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Quality engineering } & \$ 68,000 \\\hline \text { Quality circles } & \$ 35,000 \\\hline \text { Supervision of testing and inspection activities } & \$ 72,000 \\\hline \text { Net cost of scrap } & \$ 76,000 \\\hline \text { Test and inspection of in-process goods } & \$ 6,000 \\\hline \text { Liability arising from defective products } & \$ 3,000 \\\hline \text { Warranty repairs and replacements } & \$ 56,000 \\\hline \text { Debugging software errors } & \$ 68,000 \\\hline \text { Rework labour and overhead } & \$ 19,000 \\\hline\end{array}\end{array}$

- What will be the total internal failure cost appearing on the quality cost report?

A) $71,000.
B) $74,000.
C) $132,000.
D) $163,000.

Question 75

$\begin{array}{l}\text { Faast Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Quality engineering } & \$ 86,000 \\\hline \text { Quality circles } & \$ 53,000 \\\hline \text { Supervision of testing and inspection activities } & \$ 92,000 \\\hline \text { Net cost of scrap } & \$ 96,000 \\\hline \text { Test and inspection of in-process goods } & \$ 16,000 \\\hline \text { Liability arising from defective products } & \$ 13,000 \\\hline \text { Warranty repairs and replacements } & \$ 62,000 \\\hline \text { Debugging software errors } & \$ 86,000 \\\hline \text { Rework labour and overhead } & \$ 29,000 \\\hline\end{array}\end{array}$

- What will be the total appraisal cost appearing on the quality cost report?

A) $102,000.
B) $108,000.
C) $121,000.
D) $247,000.

Question 76

Westmore Company has two Service Departments and two Operating Departments. Budgeted costs and other data relating to these departments are presented below: $\begin{array} { | l | r | r | r | r | } \hline & \begin{array} { r } \text { Building \& } \\\text { Grounds }\end{array} & \text { Personnel } & \text { Operating A} & \text { Operating B } \\\hline \text { Departmental costs } & \$ 54,000 & \$ 200,000 & \$ 650,000 & \$ 800,000 \\\hline \text { Square Metres Occupied } & 1,000 & 3,000 & 12,000 & 15,000 \\\hline \text { Number of Employees } & 10 & 5 & 45 & 55 \\\hline \text { Direct Labour Hours } & & & 76,000 & 92,000 \\\hline\end{array}$ The costs of Building & Grounds are allocated first on the basis of square metres of space occupied. Personnel costs are allocated on the basis of number of employees. The departmental costs for the Operating Departments are overhead costs. Predetermined overhead rates in the Operating Departments are calculated on the basis of direct labour hours.




- Assume that the company uses the step-down method of allocating Service Department costs to Operating Departments,and Building and Grounds costs are allocated first.How much Personnel Department cost would be allocated to Operating Department B?

A) $0.
B) $107,368.
C) $107,590.
D) $112,970.

Question 77

$\begin{array}{l}\text { Faust Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Quality engineering } & \$ 68,000 \\\hline \text { Quality circles } & \$ 35,000 \\\hline \text { Supervision of testing and inspection activities } & \$ 72,000 \\\hline \text { Net cost of scrap } & \$ 76,000 \\\hline \text { Test and inspection of in-process goods } & \$ 6,000 \\\hline \text { Liability arising from defective products } & \$ 3,000 \\\hline \text { Warranty repairs and replacements } & \$ 56,000 \\\hline \text { Debugging software errors } & \$ 68,000 \\\hline \text { Rework labour and overhead } & \$ 19,000 \\\hline\end{array}\end{array}$

- What will be the total external failure cost appearing on the quality cost report?

A) $59,000.
B) $79,000.
C) $22,000.
D) $403,000.

Question 78

$\begin{array}{l}\text { Thais Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Liability arising from defective products } & \$ 65,000 \\\hline \text { Lost sales due to poor quality } & \$ 61,000 \\\hline \text { Test and inspection of in-process goods } & \$ 57,000 \\\hline \text { Quality circles } & \$ 27,000 \\\hline \text { Net cost of spoilage } & \$ 103,000 \\\hline \text { Debugging software errors } & \$ 39,000 \\\hline \text { Rework labour and overhead } & \$ 105,000 \\\hline \text { Final product testing and inspection } & \$ 42,000 \\\hline \text { Statistical process control activities } & \$ 71,000 \\\hline\end{array}\end{array}$

- What will be the total external failure cost appearing on the quality cost report?

A) $100,000.
B) $126,000.
C) $373,000.
D) $570,000.

Question 79

$\begin{array}{l}\text { Fabri Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Liability arising from defective products } & \$ 56,000 \\\hline \text { Lost sales due to poor quality } & \$ 51,000 \\\hline \text { Test and inspection of in-process goods } & \$ 47,000 \\\hline \text { Quality circles } & \$ 17,000 \\\hline \text { Net cost of spoilage } & \$ 93,000 \\\hline \text { Debugging software errors } & \$ 29,000 \\\hline \text { Rework labour and overhead } & \$ 95,000 \\\hline \text { Final product testing and inspection } & \$ 32,000 \\\hline \text { Statistical process control activities } & \$ 61,000 \\\hline\end{array}\end{array}$

- What will be the total internal failure cost appearing on the quality cost report?

A) $85,000.
B) $127,000.
C) $146,000.
D) $217,000.

Question 80

$\begin{array}{l}\text { Fabri Company's quality cost report is to be based on the following data: }\\\begin{array} { | l | r | } \hline \text { Liability arising from defective products } & \$ 56,000 \\\hline \text { Lost sales due to poor quality } & \$ 51,000 \\\hline \text { Test and inspection of in-process goods } & \$ 47,000 \\\hline \text { Quality circles } & \$ 17,000 \\\hline \text { Net cost of spoilage } & \$ 93,000 \\\hline \text { Debugging software errors } & \$ 29,000 \\\hline \text { Rework labour and overhead } & \$ 95,000 \\\hline \text { Final product testing and inspection } & \$ 32,000 \\\hline \text { Statistical process control activities } & \$ 61,000 \\\hline\end{array}\end{array}$

- What will be the total prevention cost appearing on the quality cost report?

A) $64,000.
B) $73,000.
C) $78,000.
D) $93,000.