1) The return on investment is usually considered the most popular approach to measure
performance because ________.
A) it blends all the ingredients of profitability into a single percentage
B) once determined, there is no need to use it with other measures of performance
C) it throws light on the company’s working capital
D) it measures the cash balance of the company in the most efficient manner
2) To the nearest whole cent, what should be the average lease cost per unit at a sales
volume of 34,400 units in a month? (Assume that this sales volume is within the
relevant range.)
A) $23.20
B) $21.62
C) $20.84
D) $22.40
3) Sam’s Structures desires to buy a new crane and accessories to help move and install
modular buildings. The machine sells for $75,000 and requires working capital of
$10,000. Its estimated useful life is six years and it will have a salvage value of
$17,560. Recovery of working capital will be $10,000 at the end of its useful life.
Annual cash savings from the purchase of the machine will be $20,000.
Required:
a.Compute the net present value at a 12% required rate of return.
b.Compute the internal rate of return.
c.Determine the payback period of the investment.
4) Craylon Corp. is planning the 2015 operating budget. Average operating assets of
$1,800,000 will be used during the year and unit selling prices are expected to average
$100 each. Variable costs of the division are budgeted at $500,000, while fixed costs are
set at $300,000. The company’s required rate of return is 18%.
Required:
a.Compute the sales volume necessary to achieve a 20% ROI.
b.The division manager receives a bonus of 50% of residual income. What is his
anticipated bonus for 2015, assuming he achieves the 20% ROI from part (a)?
5) For a company with diverse products, undercosting overhead of a product will lead
to ________.
A) misallocating direct labor costs of the product.
B) misallocating direct material costs of the product
C) misallocating indirect costs of another product
D) misallocating direct costs of another product
6) Animent Industries, Inc. (AII), developed standard costs for direct material and direct
labor. In 2015, AII estimated the following standard costs for one of their major
products, the 10-gallon plastic container.
During June, AII produced and sold 20,000 containers using 1,900 pounds of direct
materials at an average cost per pound of $64 and 1,000 direct manufacturing
labor-hours at an average wage of $30.50 per hour.
The direct material price variance during June is ________.
A) $7,600 unfavorable
B) $1,600 favorable
C) $1,600 unfavorable
D) $500 favorable
7) Meridian Industries manufactures and sells two models of watches, Prime and
Luxuria. It expects to sell 3,000 units of Prime and 1,000 units of Luxuria in 2016.The
following estimates are given for 2016:
Meridian had an inventory of 200 units of Prime and 75 units of Luxuria at the end of
2015 . It has decided that as a measure to counter stock outages it will maintain ending
inventory of 350 units of Prime and 200 units of Luxuria.
Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of
$10. There were 100 units of Crimpson in stock at the end of 2015.The management
does not want to have any stock of Crimpson at the end of 2016 .
What is the total budgeted cost of goods manufactured in 2016?
A) $600,000
B) $625,500
C) $652,500
D) $667,500
8) Health Care County Hospital uses an indirect job-costing system for all patients. In
June, the budgeted nursing care charges for each department and budgeted allocation
bases of nursing days are as follows:
Patient Ms. Pinto spent six days in critical care, eight days in special care. She was
shifted back to critical care due to an emergency for 6 days and finally the remainder of
the month was spent in general care.
Required:
a.Determine the budgeted overhead rate for each department.
b.What are the total charges to Ms. Pinto if she was in the facility the entire month?
9) Which of the following is true of responsibility accounting?
A) It is a system that measures the plans, budgets, actions, and actual results of a
responsibility center.
B) It is an arrangement of lines of responsibility and authority within a responsibility
center.
C) It explicitly incorporates continuous improvement and changes due to learning
curve.
D) It examines how a result will change if the original plan is not achieved.
10) Ballpark Concessions currently sells hot dogs. During a typical month, the stand
reports a profit of $9,000 with sales of $50,000, fixed costs of $21,000, and variable
costs of $0.64 per hot dog.
Next year, the company plans to start selling nachos for $3 per unit. Nachos will have a
variable cost of $0.72 and new equipment and personnel to produce nachos will
increase monthly fixed costs by $8,808. Initial sales of nachos should total 5,000 units.
Most of the nacho sales are anticipated to come from current hot dog purchasers,
therefore, monthly sales of hot dogs are expected to decline to $20,000.
After the first year of nacho sales, the company president believes that hot dog sales
will increase to $33,750 a month and nacho sales will increase to 7,500 units a month.
Required:
a.Determine the monthly breakeven sales in dollars before adding nachos.
b.Determine the monthly breakeven sales during the first year of nachos sales,
assuming a constant sales mix of 1 hotdog and 2 units of nachos.
11) After conducting a market research study, Ed Manufacturing decided to produce a
new interior door to complement its exterior door line. It is estimated that the new
interior door can be sold at a target price of $240. The annual target sales volume for
interior doors is 20,000. Ed has target operating income of 20% of sales.
What is the target cost for each interior door?
A) $288
B) $240
C) $192
D) $48
12) To allocate corporate costs to divisions, the allocation base used should ________.
A) be an output unit-level base
B) have the best cause-and-effect relationship with the costs
C) combine administrative costs and human resource management costs
D) allocate the fixed costs only
13) At the breakeven point of 2,000 units, variable costs total $4,000 and fixed costs
total $6,000. The 2,001st unit sold will contribute ________ to profits.
A) $1
B) $2
C) $3
D) $5
14) A graph comparing locked-in costs with incurred costs will have ________.
A) locked-in costs rising much faster initially, but dropping to zero after the product is
manufactured
B) the two cost lines running parallel until the end of the process, when they join
C) locked-in costs rising much faster initially than the incurred cost, but joining the
incurred cost line at the completion of the value-chain functions
D) no differences unless the product is manufactured inefficiently
15) Which of the following is true of rewarding managers on the basis of residual
income?
A) Managers are paid a fixed amount for his services regardless of the risk involved.
B) Managers’ efforts are easily measured.
C) Managers taking less risk should be rewarded more since more risk can lead to huge
losses.
D) Managers’ rewards are dependent on their own efforts and other local economic
factors.
16) ________ describes a situation in which an employee prefers to exert less effort
than the effort the owner desires because the employee’s effort cannot be accurately
monitored and enforced.
A) Goal congruence
B) Moral hazard
C) Performance report
D) Incentive report
17) What is the cost of goods manufactured for 2015?
A) $285,000
B) $277,000
C) $283,000
D) $350,000
18) The Bovise Company has assembled the following data pertaining to certain costs
that cannot be easily identified as either fixed or variable. Bovise Company has heard
about a method of measuring cost functions called the high-low method and has
decided to use it in this situation.
How is the cost function stated?
A) y = $26,672 + $11.94X
B) y = $1,360 + $11.37
C) y = $31,350 + $12.83X
D) y = $5,500 + $11X
19) Lean accounting is much simpler than traditional product costing because
________.
A) it compares value stream costs against costs that include costs of all purchased
materials
B) it computes the cost of individual products
C) calculating actual product costs by value streams requires less overhead allocation
D) adding a larger markup on value stream costs to compensate for some of the
excluded costs is easier than tracing all non value added costs
20) The first step to successful balanced scorecard implementation is clarifying the
________.
A) organization’s vision and strategy
B) elements that pertain to value-added aspects of the business
C) owner’s expectations about return on investment
D) objectives of all four balanced scorecard measurement perspectives