Archives

(Actual direct hours ‘“ Standard direct hours) × Standard rate per hour Match the following formulas or descriptions with the term (a-e) it defines. a. Direct materials price variance b. Direct labor rate variance c. Direct labor time variance d. […]

The management of River Corporation is considering the purchase of a new machine costing $380,000. The company’s desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is […]

The excess of divisional income from operations over a minimum acceptable income from operations is termed the residual income. a. True b. False Differentiate between: a) direct materials versus indirect materials b) direct labor versus indirect labor Answer: a) Direct […]

If income from operations for a division is $30,000, sales are $263,750, and invested assets are $187,500, the investment turnover is 1.3. a. True b. False In a vertical analysis, the base for cost of goods sold is a. total […]

If the products of a manufacturing process are produced to customer specifications, a process cost system is more appropriate than a job order cost system. a. True b. False Budgets are normally used only by profit-making businesses. a. True b. […]

The minimum accepted divisional income from operations is set by top management by establishing a maximum rate of return considered acceptable for invested assets. a. True b. False Ford’s Expedition sport utility vehicle is its most profitable model. Therefore, Ford […]

The journal entry to record the transfer of 1,600 units of part number 1177 with a value of $2.50 each, to work in process is a. Materials Work in Process 4,000 4,000 b. Work in Process Factory Overhead 4,000 4,000 […]

A business operated at 100% of capacity during its first month and incurred the following costs: If 500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable […]

The controller’s staff consists of management accountants responsible for systems and procedures, general accounting, budgets, taxes, and cost accounting. a. True b. False Answer: The Darwin Company reports the following information: Period costs are a. $24,500 b. $30,300 c. $29,200 […]

A summary of the materials requisitions completed during a period serves as the basis for transferring the cost of the materials from the controlling account in the general ledger to the controlling accounts for a. Work in Process and Cost […]

Given the following cost and activity observations for Bounty Company’s utilities, use the highÂlow method to calculate Bounty’ variable utilities costs per machine hour. Round your answer to the nearest cent. a. $10.00 b. $0.67 c. $0.63 d. $0.11 Reporting […]

maintenance supplies Match the costs that follow to the type of product cost (a-c) or designate as not a product cost (d). a. direct labor b. direct materials c. factory overhead d. not a product cost Answer: The management of […]

Prime costs are the combination of direct labor costs and factory overhead costs. a. True b. False Electricity purchased to operate factory machinery would be included as part of the cost of products manufactured under the absorption costing concept. a. […]

Number of payroll checks An activity base is used to charge service department expenses. Match the following activity bases with the appropriate department (a-h). a. Purchasing b. Payroll accounting c. Human resources d. Maintenance e. Information systems f. Marketing g. […]

The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Assets Liabilities and Stockholders’ Equity Income Statement What is the dividend yield for […]

The inventory accounts generally maintained by a manufacturing firm are only finished goods and materials. a. True b. False Answer: Nails and screws used in the production of the bar stools Bartel Corporation produces bar stools for restaurants. Indicate whether […]

Based on the above data, what is the amount of quick assets? a. $168,000 b. $96,000 c. $60,000 d. $61,000 Answer: actions to achieve budgeted goals Match each phrase that follows with the term (a-e) it describes. a. planning b. […]

Flexible budgeting builds the effect of changes in level of activity into the budget system. a. True b. False Answer: If the activities causing overhead costs are different across different departments and products, use of a plantwide factory overhead rate […]

On the variable costing income statement, all of the fixed costs are deducted from the contribution margin. a. True b. False Below is budgeted production and sales information for Flushing Company for the month of December: The unit selling price […]

The following data is given for the Harry Company: Overhead is applied on standard labor hours. (Round interim calculations to the nearest cent.) The direct labor time variance is a. $6,000 favorable b. $6,000 unfavorable c. $33,000 unfavorable d. $33,000 […]

The debits to Work in Process’”Assembly Department for May, together with data concerning production, are as follows: All direct materials are placed in process at the beginning of the process and the firstÂ- in, firstÂout method is used to cost […]

Yasmin Co. can further process Product B to produce Product C. Product B is currently selling for $30 per pound and costs $28 per pound to produce. Product C would sell for $55 per pound and would require an additional […]

compares actual performance against budgeted goals Match each phrase that follows with the term (a-e) it describes. a. planning b. directing c. controlling d. budget slack e. goal conflict Cash payback method Match the methods that follow with the correct […]

The budgeted balance sheet assumes that all operating and financing plans are met. a. True b. False Answer: Principal components of a master budget include a. production budget b. sales budget c. capital expenditures budget d. all of these Answer: […]

The fixed cost per unit varies with changes in the level of activity. a. True b. False ABC Corporation has three service departments with the following costs and activity base: ABC has three operating divisions, Micro, Macro and Super. Their […]

Which of the following results in long lead time? a. long setup times b. large batch sizes c. large inventories d. all of the above Answer: A business operated at 100% of capacity during its first month and incurred the […]

The balance sheets at the end of each of the first two years of operations indicate the following: If net income is $150,000 and interest expense is $20,000 for Year 2, what is the rate earned on total assets for […]

Which of the following is not an external failure cost? a. warranty work b. processing returned merchandise c. rework d. correcting invoice errors The average rate of return method of capital investment analysis gives consideration to the present value of […]

The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory overhead and $1.30 for fixed factory overhead) based on 100% of normal capacity of 80,000 machine hours. The standard cost and the actual cost of factory […]

Number of work orders An activity base is used to charge service department expenses. Match the following activity bases with the appropriate department (a-h). a. Purchasing b. Payroll accounting c. Human resources d. Maintenance e. Information systems f. Marketing g. […]

A backflush accounting system uses work in process inventories as control points between each process step. a. True b. False The difference between the standard cost of a product and its actual cost is called a variance. a. True b. […]

Goal conflict can be avoided if budget goals are carefully designed for consistency across all areas of the organization. a. True b. False Contractors who sell to government agencies would be most likely to use which of the following cost […]

If fixed costs are $400,000 and the unit contribution margin is $20, what amount of units must be sold in order to have a zero profit? a. 25,000 units b. 10,000 units c. 400,000 units d. 20,000 units In determining […]

Ratchford Clocks manufactures alarm clocks and wall clocks and allocates overhead based on direct labor hours. The production process is set up in three departments: Assembly, Finishing, and Calibrating. The following is information regarding the direct labor used to produce […]

All of the following are examples of indirect labor except a. maintenance personnel b. janitorial personnel c. machine operators d. plant managers Answer: A manager in a cost center also has responsibility and authority over the revenues. a. True b. […]

A process-oriented layout segments production facilities into functional departments. a. True b. False Answer: Fashion Jeans, Inc. sells two lines of jeans; Simple Life and Fancy Life. Simple Life sells for $85, and Fancy Life sells for $100. The company […]

For Years 1’“5, a proposed expenditure of $500,000 for a fixed asset with a 5-year life has expected net income of $40,000, $35,000, $25,000, $25,000, and $25,000, respectively, and net cash flows of $90,000, $85,000, $75,000, $75,000, and $75,000, respectively. […]

If 30,000 units of materials enter production during the first year of operations, 25,000 of the units are finished, and 5,000 are 50% completed, the number of equivalent units of production would be 28,500. a. True b. False Answer: Two […]

Set up time is disregarded as an improvement priority under the manufacturing concept. a. traditional b. lean c. total quality management d. product cost Answer: Ruby Company produces a chair that requires 5 yards of material per unit. The standard […]

Income from operations of the Pierce Automobile Division is $2,225,000. If income from operations before service department charges is $3,250,000, a. operating expenses are $1,025,000 b. total service department charges are $1,025,000 c. noncontrollable charges are $1,025,000 d. direct manufacturing […]

For a period during which the quantity of inventory at the end was larger than that at the beginning, income from operations reported under variable costing will be larger than income from operations reported under absorption costing. a. True b. […]

After the sales budget is prepared, the production budget is normally prepared next. a. True b. False Answer: Jacoby Company received an offer from an exporter for 30,000 units of product at $15 per unit. The acceptance of the offer […]

In a lean environment, process problems are more visible than they are in a traditional environment. a. True b. False Answer: The internal rate of return method of analyzing capital investment proposals uses present value concepts to compute a rate […]

Dotterel Corporation uses the variable cost concept of product pricing. Below is cost information for the production and sale of 35,000 units of its sole product. Dotterel desires a profit equal to an 11.2% rate of return on invested assets […]

The total manufacturing cost variance is a. the difference between actual costs and standard costs for units produced b. the flexible budget variance plus the time variance c. the difference between planned costs and standard costs for units produced d. […]

The rate of return on investment may be computed by multiplying investment turnover by the profit margin. a. True b. False Cupcake mix The following are some of the costs incurred by Cupcake Company. Identify them as either: a. Prime […]

Standard variable overhead for actual units produced Match the following formulas or descriptions with the term (a-e) it defines. a. Direct materials price variance b. Direct labor rate variance c. Direct labor time variance d. Direct materials quantity variance e. […]

Materials used by Jefferson Company in producing Division C’s product are currently purchased from outside suppliers at a cost of $10 per unit. However, the same materials are available from Division A. Division A has unused capacity and can produce […]

When estimated costs are used in applying the cost-plus approach to product pricing, the estimates should be based upon normal levels of performance. a. True b. False Answer: For the current year ending January 31, Harp Company expects fixed costs […]

Schedule of Activity Costs From the above schedule, calculate the (a) value-added and (b) non-value-added costs. Answer: Salesman commissions Match the items below for a bakery to the type of cost (a-d). a. Direct materials b. Direct labor c. Factory […]

Depreciation expense’”factory The following are some of the costs incurred by Cupcake Company. Identify them as either: a. Prime costs b. Conversion costs c. Both prime and conversion costs d. Neither prime or conversion costs Answer: Just-in-time processing is a […]

Mocha Company manufactures a single product by a continuous process, involving three production departments. The records indicate that direct materials, direct labor, and applied factory overhead for Department 1 were $100,000, $125,000, and $150,000, respectively. The records further indicate that […]

At the end of the year, overhead applied was $42,000,000. Actual overhead was $40,300,000. Closing over/under applied overhead into Cost of Goods Sold would cause net income to a. increase by $1,700,000 b. decrease by $1,700,000 c. increase by $3,400,000 […]

The unfavorable volume variance may be due to all of the following factors except a. failure to maintain an even flow of work b. machine breakdowns c. unexpected increases in the cost of utilities d. failure to obtain enough sales […]

In a service firm, it may be necessary to have several activity bases to properly match the change in costs with the changes in various activities. a. True b. False Smith Company reports the following information: Factory overhead is 75% […]

As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for January, February, and March were as follows: $120,000, $140,000, and $150,000, respectively. Of each month’s sales, 20% are for cash. Of […]

If fixed costs are $850,000 and variable costs are 60% of sales, what is the break-even point (dollars)? a. $2,125,000 b. $340,000 c. $3,400,000 d. $1,416,666 On the balance sheet for a manufacturing business, the cost of direct materials, direct […]

Connor Company’s fixed costs are $400,000, the unit selling price is $25, and the unit variable costs are $15. What is the break-even sale (units) if the variable costs are increased by $2? a. 50,000 units b. 30,770 units c. […]

The Skagit Company manufactures Hooks and Nooks. The following shows the activities per product and total activity information: Calculate the total factory overhead to be charged to Nooks. a. $300,000 b. $400,000 c. $488,000 d. $600,000 The direct labor and […]

The dollars available from each unit of sales to cover fixed cost and profit is the unit variable cost. a. True b. False The management of Wyoming Corporation is considering the purchase of a new machine costing $375,000. The company’s […]

Costs on the income statement for both a merchandiser and a manufacturer would be a. operating expenses b. direct materials c. direct labor incurred d. cost of goods manufactured Answer: The level of inventory of a manufactured product has increased […]

A plant manager’s salary is a. a direct cost and an indirect cost b. a direct cost c. an indirect cost d. a period cost The period costs of a textbook printer would include a. wages of a press operator […]

In net present value analysis for a proposed capital investment, the expected future net cash flows are averaged and then reduced to their present values. a. True b. False Answer: A company reports the following: Determine the (a) accounts receivable […]

actual cost > standard cost at actual volumes Match the following descriptions with the term (a-e) it describes: a. Ideal standard b. Nonfinancial performance measure c. Currently attainable standard d. Unfavorable cost variance e. Favorable cost variance Discontinuing a segment […]

Which of the following is a disadvantage of decentralization? a. Decisions made by one manager may negatively affect the profitability of the entire company. b. Decentralization helps retain quality managers. c. Managers closest to the operations make decisions. d. Managers […]

Operational issues are made by managers closest to the operations Match each of the following phrases as describing (a) an advantage, (b) a disadvantage, or (c) neither of decentralization. a. Advantage of decentralization b. Disadvantage of decentralization c. Neither an […]

A favorable cost variance occurs when actual cost is less than budgeted cost at actual volumes. a. True b. False The Lucy Corporation purchased and used 129,000 board feet of lumber in production, at a total cost of $1,548,000. Original […]

Which of the following would be included in the cost of a product manufactured according to variable costing? a. sales commissions b. office supply costs c. interest expense d. direct materials The anticipated purchase of a fixed asset for $400,000, […]

The inventory at June 1 and costs charged to Work in Process’”Department 60 during June are as follows: Total cost to be accounted for $880,400 During June, 32,000 units were placed into production and 31,200 units were completed, including those […]

The Swan Company produces its product at a total cost of $43 per unit. Of this amount, $8 per unit is selling and administrative costs. The total variable cost is $30 per unit and the desired profit is $20 per […]

Chapter 14(13): Statement of Cash Flows 61. Cash paid for preferred stock dividends should be shown on the statement of cash flows under a. investing activities b. financing activities c. noncash investing and financing activities d. operating activities ANSWER: b […]

Chapter 14(13): Statement of Cash Flows 147. On the basis of the details of the common stock account presented below, calculate the total amount to be recorded in financing section of the statement of cash flows. Assume any stock issues […]

CHAPTER 14(13): STATEMENT OF CASH FLOWS 1. The statement of cash flows is not one of the basic financial statements. a. True b. False ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-01 – 16–01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 – Statement […]

Chapter 14(13): Statement of Cash Flows 116. On the statement of cash flows, the cash flows from operating activities section would include a. receipts from the issuance of capital stock b. payment for interest on short-term notes payable c. payments […]

Chapter 14(13): Statement of Cash Flows ANSWER: Breach Co. Statement of Cash Flows For Year Ended December 31 Cash flows from operating activities: Net income $ 76,000 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation […]

Chapter 15(14): Financial Statement Analysis 62. What type of analysis is indicated by the following? Increase (Decrease) Current Year Preceding Year Amount Percent Current assets $ 430,000 $ 500,000 $ (70,000) (14%) Fixed assets 1,740,000 1,500,000 240,000 16% a. vertical […]

CHAPTER 15(14): FINANCIAL STATEMENT ANALYSIS 1. Comparable financial statements are designed to compare the financial statements of two or more corporations. a. True b. False ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.17-01 – 17–01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.23 – […]

Chapter 15(14): Financial Statement Analysis 146. Condensed data taken from the ledger of St. Louis Company at December 31, for the current and preceding years, are as follows: Year 2 Year 1 Current assets $160,000 $130,000 Property, plant, and equipment […]

Chapter 15(14): Financial Statement Analysis 169. A company reported the following: Net income $270,000 Preferred dividends $10,000 Shares of common stock outstanding 20,000 Market price per share of common stock $36.40 Calculate the company’s priceearnings ratio. Round your answer to […]

Chapter 15(14): Financial Statement Analysis 109. The particular analytical measures chosen to analyze a company may be influenced by all of the following except a. industry type b. capital structure c. diversity of business operations d. product quality or service […]

CHAPTER 16(1): MANAGERIAL ACCOUNTING CONCEPTS AND PRINCIPLES 1. Managerial accounting reports must be prepared according to generally accepted accounting principles. a. True b. False ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.18-01 – 18–01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.25 – Managerial […]

Chapter 16(1): Managerial Accounting Concepts and Principles 125. Given the following data: Cost of materials used $45,000 Direct labor costs 48,000 Factory overhead 39,000 Work in process, beg. 28,000 Work in process, end. 18,000 Finished goods, beg. 28,000 Finished goods, […]

Chapter 16(1): Managerial Accounting Concepts and Principles 69. What is the primary criterion for the preparation of managerial accounting reports? a. relevance of the reports b. manager needs c. timing of the reports d. cost of the reports ANSWER: b […]

Chapter 16(1): Managerial Accounting Concepts and Principles 162. The Putney Company reports the following information: Sales $76,500 Direct materials used 7,300 Depreciation on factory equipment 4,700 Indirect labor 5,900 Direct labor 10,500 Factory rent 4,200 Factory utilities 1,200 Sales salaries […]

Chapter 17(2): Job Order Costing 64. At the end of the year, overhead applied was $42,000,000. Actual overhead was $40,300,000. Closing over/under applied overhead into Cost of Goods Sold would cause net income to a. increase by $1,700,000 b. decrease […]

Chapter 17(2): Job Order Costing 159. National Survey Company uses a job order cost system. (a) Indicate the source of the data for debiting Work in Process for each of the following: (1) Direct materials requisitioned (2) Direct labor used […]

CHAPTER 17(2): JOB ORDER COSTING 1. Cost accounting systems measure, record, and report product costs. a. True b. False ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.19-01 – 19–01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs ACCT.ACBSP.APC.34 – Job […]

Chapter 17(2): Job Order Costing 114. Aspen Technologies has the following budget data: Estimated direct labor hours 15,000 Estimated direct labor dollars $90,000 Estimated factory overhead costs $198,000 If factory overhead is to be applied based on direct labor hours, […]

Chapter 18(3): Process Cost Systems ANSWER: (a) Factory Overhead ($4,000 × 80%) 3,200 Administrative Expenses ($4,000 × 20%) 800 Cash 4,000 (b) Factory Overhead 1,200 Cash 1,200 (c) Selling Expenses 3,500 Factory Overhead 5,500 Wages Payable 9,000 (d) Factory Overhead […]

CHAPTER 18(3): PROCESS COST SYSTEMS 1. Process manufacturing usually reflects a manufacturer that produces small quantities of unique items. a. True b. False ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.20-01 – 20–01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.35 – Process Costing […]

Chapter 18(3): Process Cost Systems 157. The cost per equivalent units of direct materials and conversion in the Bottling Department of Beverages on Jolt Company is $0.47 and $0.15, respectively. The equivalent units to be assigned costs are as follows. […]

Chapter 18(3): Process Cost Systems Department W had 2,400 units, one-third completed at the beginning of the period; 16,000 units were transferred to Department X from Department W during the period; and 1,800 units were one-half completed at the end […]

Chapter 18(3): Process Cost Systems 66. The two categories of cost comprising conversion costs are a. direct labor and indirect labor b. direct labor and factory overhead c. factory overhead and direct materials d. direct labor and direct materials ANSWER: […]

Chapter 19(4): Cost Behavior and Cost-Volume-Profit Analysis 194. For the past year, Iris Company had fixed costs of $6,708,000, a unit variable cost of $444, and a unit selling price of $600. For the coming year, no changes are expected […]

Chapter 19(4): Cost Behavior and Cost-Volume-Profit Analysis 61. Cost behavior refers to the manner in which a. a cost changes as the related activity changes b. a cost is allocated to products c. a cost is used in setting selling […]

CHAPTER 19(4): COST BEHAVIOR AND COST-VOLUME-PROFIT ANALYSIS 1. Cost behavior refers to the methods used to estimate costs for use in managerial decision making. a. True b. False ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.21-01 – 21–01 ACCREDITING […]

Chapter 19(4): Cost Behavior and Cost-Volume-Profit Analysis 110. Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit, and fixed costs are $75,000. The contribution margin ratio and the unit contribution margin are a. 47% […]

Chapter 19(4): Cost Behavior and Cost-Volume-Profit Analysis 165. Assuming that last year’s fixed costs totaled $675,000. What was Rusty Co.’s breakeven point in units? a. 16,875 units b. 30,100 units c. 30,000 units d. 11,250 units ANSWER: c DIFFICULTY: Moderate […]

Chapter 20(5): Variable Costing for Management Analysis 136. Philadelphia Company has the following information for March: Sales $450,000 Variable cost of goods sold 240,000 Fixed manufacturing costs 70,000 Variable selling and administrative expenses 52,000 Fixed selling and administrative expenses 35,000 […]

Chapter 20(5): Variable Costing for Management Analysis 61. A change in the amount of sales can be due to either a change in the units sold or a change in price or both. a. True b. False ANSWER: True DIFFICULTY: […]

Chapter 20(5): Variable Costing for Management Analysis 99. A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (5,000 units): Direct materials $70,000 Direct labor 20,000 Variable factory overhead 10,000 Fixed factory […]

CHAPTER 20(5): VARIABLE COSTING FOR MANAGEMENT ANALYSIS 1. In determining cost of goods sold, two alternate costing concepts can be used: absorption costing and variable costing. a. True b. False ANSWER: True DIFFICULTY: Bloom’s: Remembering Easy LEARNING OBJECTIVES: FNMN.WARD.16.20-01 – […]

Chapter 21(6): Budgeting 65. Budgets need to be fair and attainable for employees to consider the budget important in their normal daily activities. Which of the following is not considered a human behavior problem? a. setting goals among managers that […]

CHAPTER 21(6): BUDGETING 1. The task of preparing a budget should be the sole task of the most important department in an organization. a. True b. False ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.22-01 – 22–01 ACCREDITING STANDARDS: […]

Chapter 21(6): Budgeting 158. Prepare a flexible budget for Cedar Jeans Company using production levels of 16,000, 18,000, and 20,000 units produced. The following is additional information necessary to complete the budget: Variable costs: Direct labor ($6.00 per unit) Direct […]

Chapter 21(6): Budgeting Below is budgeted production and sales information for Bluebird Company for the month of December: Product XXX Product ZZZ Estimated beginning inventory 30,000 units 18,000 units Desired ending inventory 32,000 units 15,000 units Anticipated sales 520,000 units […]

Chapter 22(7): Performance Evaluation Using Variances from Standard Costs 143. Compute the direct labor rate and time variances for Taylor Company. ANSWER: Direct labor rate variance: $62,928 – ($14.00 × 4,560) = $912 favorable Direct labor time variance: [4,560 – […]

Chapter 22(7): Performance Evaluation Using Variances from Standard Costs 103. Which of the following would not lend itself to applying direct labor variances? a. help desk assistant b. research and development scientist c. customer service personnel d. telemarketer ANSWER: b […]

Chapter 22(7): Performance Evaluation Using Variances from Standard Costs 61. Standard costs are divided into which of the following components? a. variance standard and quantity standard b. materials standard and labor standard c. quality standard and quantity standard d. price […]

CHAPTER 22(7): PERFORMANCE EVALUATION USING VARIANCES FROM STANDARD COSTS 1. A variable cost system is an accounting system where standards are set for each manufacturing cost element. a. True b. False ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.23-01 […]

Chapter 23(8): Performance Evaluation for Decentralized Operations 64. The objective of transfer pricing is to encourage each division manager to transfer goods and services between divisions if overall company income can be increased by doing so. a. True b. False […]

CHAPTER 23(8): PERFORMANCE EVALUATION FOR DECENTRALIZED OPERATIONS 1. Separation of businesses into more manageable operating units is termed decentralization. a. True b. False ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.24-01 – 24–01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.36 – Budgeting and […]

Chapter 23(8): Performance Evaluation for Decentralized Operations 120. Marshall Corporation had $220,000 in invested assets, sales of $242,000, income from operations of $66,000, and a desired minimum rate of return of 3%. The rate of return on investment for Marshall […]

Chapter 23(8): Performance Evaluation for Decentralized Operations 177. Using the data below for the Ace Guitar Company, determine the divisional income from operations for the A and B regions. A Region B Region Sales $500,000 $900,000 Cost of goods sold […]

Chapter 24(9): Differential Analysis, Product Pricing, and Activity-Based Costing 144. MZE Manufacturing Company has a normal plant capacity of 37,500 units per month. Because of an extra-large quantity of inventory on hand, it expects to produce only 30,000 units in […]

Chapter 24(9): Differential Analysis, Product Pricing, and Activity-Based Costing 107. What is the contribution per machine hour for Wales? a. $35 b. $28 c. $17 d. $7 ANSWER: c DIFFICULTY: Moderate Bloom’s: Applying LEARNING OBJECTIVES: FNMN.WARD.16.24-03 – LO: 24-03 ACCREDITING […]

Chapter 24(9): Differential Analysis, Product Pricing, and Activity-Based Costing 58. Delaney Company is considering replacing equipment which originally cost $600,000 and which has $420,000 accumulated depreciation to date. A new machine will cost $790,000. What is the sunk cost in […]

CHAPTER 24(9): DIFFERENTIAL ANALYSIS, PRODUCT PRICING 1. Differential revenue is the amount of income that would result from the best available alternative proposed use of cash. a. True b. False ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.24-01 – […]

Chapter 25(10): Capital Investment Analysis 150. An 8-year project is estimated to cost $400,000 and have no residual value. If the straight-line depreciation method is used and the average rate of return is 5%, determine the estimated annual net income. […]

Chapter 25(10): Capital Investment Analysis 167. An investment of $185,575 is expected to generate returns of $65,000 per year for each of the next 4– years. What is the investment’s internal rate of return? Below is a table for the […]

CHAPTER 25(10): CAPITAL INVESTMENT ANALYSIS 1. The process by which management plans, evaluates, and controls long-term investment decisions involving fixed assets is called capital investment analysis. a. True b. False ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.26-01 – […]

Chapter 25(10): Capital Investment Analysis 107. The management of California Corporation is considering the purchase of a new machine costing $400,000. The company’s desired rate of return is 10%. The present value factors for $1 at compound interest of 10% […]

Chapter 25(10): Capital Investment Analysis 61. The process by which management plans, evaluates, and controls long-term investment decisions involving fixed assets is called a. absorption cost analysis b. variable cost analysis c. capital investment analysis d. cost-volume-profit analysis ANSWER: c […]

Chapter 26(11): Cost Allocation and Activity-Based Costing 96. The Sawtooth Leather Company manufactures leather handbags and moccasins. For simplicity, the company has decided to use a single plantwide factory overhead rate method to allocate factory overhead. Calculate the amount of […]

CHAPTER 26(11): COST ALLOCATION AND ACTIVITY-BASED COSTING 1. Product costing consists of only direct materials and direct labor. a. True b. False ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.26-01 – 26–01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 – Managerial Accounting Features/Costs […]

Chapter 26(11): Cost Allocation and Activity-Based Costing 59. Determine the overhead from both production departments allocated to each unit of Product A if Blue Ridge Marketing Inc. uses a multiple department rate system. a. $396.80 per unit b. $425.60 per […]

Chapter 27(12): Lean Principles, Lean Accounting, and Activity Analysis 104. Which of the following is not an external failure cost? a. warranty work b. processing returned merchandise c. rework d. correcting invoice errors ANSWER: c DIFFICULTY: Easy Bloom’s: Remembering LEARNING […]

CHAPTER 27(12): LEAN PRINCIPLES, LEAN ACCOUNTING, AND ACTIVITY ANALYSIS 1. Lean manufacturing focuses on reducing time, cost, and poor quality in processes. a. True b. False ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: FNMN.WARD.16.27-01 – 27–01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 […]

Chapter 27(12): Lean Principles, Lean Accounting, and Activity Analysis 72. Traditional manufacturing emphasizes all of the following except a. team oriented employee involvement b. process-oriented layout c. push manufacturing d. cost accumulation by department ANSWER: a DIFFICULTY: Easy Bloom’s: Remembering […]

Yield measures the ratio of the materials output quantity to the materials input quantity. a. True b. False Answer: If a company uses average costing instead of FIFO, it will still get the same unit costs. a. True b. False […]

Variances from standard costs are reported to a. suppliers b. stockholders c. management d. creditors The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were […]

Manley Co. manufactures office furniture. During the most productive month of the year, 4,500 desks were manufactured at a total cost of $86,625. In its slowest month, the company made 1,800 desks at a cost of $49,500. Using the high-low […]

For a construction contractor, the wages of carpenters would be classified as factory overhead cost. a. True b. False Answer: Using measures to assess a business’s ability to pay its current liabilities is called current position analysis. a. True b. […]

A 15% change in sales will result in a 15% change in net income. a. True b. False Answer: If the under applied factory overhead amount is immaterial, it is transferred to Cost of Goods Sold at the end of […]

Normally, standard costs should be revised when labor rates change to incorporate new union contracts. a. True b. False Department J had no work in process at the beginning of the period; 18,000 units were completed during the period; and […]

The Blue Lake Water Company has two departments, Purifying and Bottling. The Bottling Department received 76,000 liters from the Purifying Department. During the period, the Bottling Department completed 74,000 liters, including 3,000 liters of work in process at the beginning […]

Average rate of return equals average investment divided by estimated average annual income. a. True b. False Answer: What type of analysis is indicated by the following? Increase (Decrease) Current Year Preceding Year Amount Percent Current assets $ 430,000 $ […]

Purchase requisitions for Purchasing and the number of payroll checks for Payroll Accounting are examples of activity bases. a. True b. False ABC Corporation has three service departments with the following costs and activity base: ABC has three operating divisions, […]

Service firms can only have one activity base for analyzing changes in costs. a. True b. False The Swan Company produces its product at a total cost of $43 per unit. Of this amount, $8 per unit is selling and […]

Nonfinancial accounting information is used more often for long-term operating decisions than is financial information. a. True b. False Tippi Company produces lamps that require 2.25 standard hours per unit at an hourly rate of $15.00 per hour. Production of […]

Customer service calls Identify the following quality control activities as either value-added or non-value-added. a. Value-added b. Non-value-added In the contribution margin analysis, the effect of a change in the number of units sold, assuming no change in unit sales […]

A performance report that identifies the amount of employee downtime is a financial accounting report. a. True b. False Answer: Common allocation bases are a. direct labor dollars, direct labor hours, direct material dollars b. direct labor dollars, direct labor […]

Sprinkles for decoration (indirect material) The following are some of the costs incurred by Cupcake Company. Identify them as either: a. Prime costs b. Conversion costs c. Both prime and conversion costs d. Neither prime or conversion costs Which of […]

The numerator in calculating the accounts receivable turnover is a. total assets b. sales c. accounts receivable at year-end d. average accounts receivable Answer: Periods in time that experience increasing price levels are known as periods of a. inflation b. […]

Sets the price according to demand Match the definitions that follow with the term (a’“e) it defines. a. Demand-based concept b. Competition-based concept c. Product cost concept d. Target costing e. Production bottleneck requires a restatement of prior-period financial statements […]

Given the following cost and activity observations for George Company’s utilities, use the highÂlow method to calculate George’s variable utilities costs per machine hour. a. $100.00 b. $1.00 c. $10.00 d. $0.10 The sales, income from operations, and invested assets […]

The basis for recording direct and indirect labor costs incurred is a summary of the period’s a. job order cost sheets b. time tickets c. employees’ earnings records d. clock cards In an effort to simplify the multiple production department […]

prime costs Match each phrase that follows with the term (a-h) it describes. a. direct labor and factory overhead b. direct labor and direct materials c. transferred in costs d. equivalent units e. process costing f. job order costing g. […]

Allocated equally among divisions An activity base is used to charge service department expenses. Match the following activity bases with the appropriate department (a-h). a. Purchasing b. Payroll accounting c. Human resources d. Maintenance e. Information systems f. Marketing g. […]

The variance from standard for factory overhead resulting from incurring a total amount of factory overhead cost that is greater or less than the amount budgeted for the level of operations achieved is termed controllable variance. a. True b. False […]

Equivalent units are the sum of direct materials used and direct labor incurred. a. True b. False Answer: The job order costing system is used by service firms to determine revenues, expenses, and ultimately profit. a. True b. False Answer: […]

If income from operations for a division is $120,000, sales are $975,000, and invested assets are $750,000, the investment turnover is 1.3. a. True b. False Which of the following would not be considered an internal centralized service department? a. […]

Target costing is arrived at by taking a. the selling price minus desired profit b. the selling price and adding desired profit c. the selling price and subtracting the budget standard cost d. the budget standard cost and reducing it […]

Which of the following is not a reason a service firm would use a job order costing system? a. to help control costs b. to determine client billing c. to determine department costs within the firm d. to determine profit […]

Sales mix is generally defined as the relative distribution of sales among the various products sold. a. True b. False Which of the following are present value methods of analyzing capital investment proposals? a. internal rate of return and average […]

Project A requires an original investment of $50,000. The project will yield cash flows of $15,000 per year for 7 years. Project B has a calculated net present value of $13,500 over a 4-year life. Project A could be sold […]

Managerial accounting reports must be useful to the user of the information. a. True b. False A bottleneck begins when demand for the company’s product exceeds the ability to produce the product. a. True b. False Answer: True For a […]

The direct labor time variance measures the efficiency of the direct labor force. a. True b. False Adams Company is a manufacturing company that has worked on several production jobs during the first quarter of the year. Below is a […]

The budgeting process is used to effectively communicate planned expectations regarding profits and expenses to the entire organization. a. True b. False Tulip Company produces two products, T and U. The indirect labor costs include the following two items: The […]

In contribution margin analysis, the unit price or unit cost factor is computed as: a. the difference between the actual unit price or unit cost and the planned unit price or cost, multiplied by the planned quantity sold b. the […]

Department G had 3,600 units, 40% completed at the beginning of the period, 12,000 units were completed during the period, 2,000 units were 20% completed at the end of the period, and the following manufacturing costs were debited to the […]

Consulting the persons affected by a budget when it is prepared can provide an effective means of motivation and cooperation. a. True b. False Conversion costs are the combination of direct labor, direct material, and factory overhead costs. Answer: The […]

For a period during which the quantity of product manufactured exceeded the quantity sold, income from operations reported under absorption costing will be larger than income from operations reported under variable costing. a. True b. False Answer: If in evaluating […]

Sifton Electronics Corporation manufactures and assembles electronic motor drives for video cameras. The company assembles the motor drives for several accounts. The process consists of a lean cell for each customer. The following information relates only to one customer’s lean […]

Property taxes on a factory building would be included as part of the cost of products manufactured under the absorption costing concept. a. True b. False The contribution margin ratio is computed as contribution margin divided by sales. a. True […]

occurs when a company abandons a segment Match each definition that follows with the term (a’“h) it defines. a. discontinued operations b. extraordinary items c. change from one generally accepted accounting principle to another d. horizontal analysis e. vertical analysis […]