1) All costs contain both a fixed and a variable portion.
2) On a CVP graph, total fixed costs are shown as a horizontal line.
3) The indirect method of presenting the investing activities section of the statement of
cash flow reconciles net income to net cash provided by investing activities.
4) Transferred-in costs are incurred in a previous process and are carried forward as part
of the product’s cost when it moves to the next process.
5) Differential cost is the difference in cost between two alternatives.
6) The Sarbanes-Oxley Act was designed to hold corporations accountable for internal
control and financial reporting functions.
7) Under absorption costing, all nonmanufacturing costs are treated as period costs.
8) Make or buy decisions are often referred to as outsourcing decisions.
9) The IMA’s overarching ethical principles include: Honesty, Fairness, Objectivity, and
Responsibility.
10) The duties of an investment center manager are similar to those of a CEO.
11) Investigating significant variances from a budget to assign responsibility is an
example of management by exception.
12) The last step of the 5-step process costing procedure is to summarize the flow of
physical units.
13) Information technology has made many tasks easier, but not all tasks. Which of the
following tasks performed by managers requires more critical thinking skills than the
others because it is not as dependent upon information technology?
A) Sensitivity analysis
B) Analyzing and investigating the root causes of variances in responsibility center
reports
C) Rolling up individual units’ budgets into the companywide budget
D) Preparing responsibility center performance reports that identify variances between
actual and budgeted revenues and costs
14) A company has monthly fixed costs of $112,500. The variable costs are $6.00 per
unit. If the sales price of a unit is $19.00 and we sell 7,500 units, the company’s average
fixed costs per unit will be
A) $13.00 per unit
B) $6.00 per unit
C) $21.00 per unit
D) $15.00 per unit
15) Sneider Family Orange Groves processes a variety of fresh juices. The company has
the following expenses for July:
What is the total cost for the research and development category of the value chain?
A) $75,000
B) $78,000
C) $63,000
D) $197,000
16) Happy Helpers Maid Service is calculating its standard direct labor rate. The direct
labor rate is $12 per hour. Happy Helpers incurs payroll tax expense of 15% of the
direct labor rate and incurs costs for sick-days and vacation days of $3 per hour. What is
the standard rate per direct labor hour?
A) $15.00
B) $16.80
C) $12.00
D) $13.80
17) The standard cost of direct labor per hour is $12.50. One and one half standard
direct labor hours are allowed per unit of finished goods. During the current period, 560
units were produced using 1,250 direct labor hours. The direct labor rate variance is
$1,000 unfavorable. Calculate the actual cost of direct labor per hour.
A) $12.50
B) $32.80
C) $13.30
D) $18.75
18) J.I.T Auto sells its cars for $20,000 per unit (car). Variable costs are currently 60%
of sales revenue. Fixed expenses are $480,000,000 per year.
What is the breakeven point in units at the current selling price?
A) 8,000 units
B) 15,000 units
C) 60,000 units
D) 40,000 units
19) Selected information regarding a company’s most recent quarter follows (all data in
thousands).
What was the beginning finished goods inventory?
A) $2,300
B) $500
C) $2,100
D) $2,500
20) Company X sells widgets. The following information summarizes the company’s
operating activities for the year:
What is gross profit?
A) $15,500
B) $21,000
C) $17,000
D) $12,500
21) Kramer Company manufactures coffee tables and uses an activity-based costing
system to allocate all manufacturing conversion costs. Each coffee tables consists of 20
separate parts totaling $240 in direct materials, and requires 5.0 hours of machine time
to produce. Additional information follows:
What is the cost of machining per coffee table?
A) $15.00
B) $21.00
C) $13.75
D) $55.00
22) The Hanna Company uses straight-line depreciation and is considering a capital
expenditure for which the following relevant cash flow data have been estimated:
The accounting rate of return is closest to
A) 39.00%
B) 9.00%
C) 30.00%
D) 7.69%
23) What type of variance results when the actual fixed overhead costs incurred are
greater than the budgeted fixed overhead costs?
A) Favorable fixed overhead budget variance
B) Unfavorable fixed overhead budget variance
C) Favorable fixed overhead volume variance
D) Unfavorable fixed overhead volume variance
24) For anything to be considered a “cash equivalent,” the investment must be
A) convertible to a known amount of cash
B) convertible to cash within 5 years
C) convertible to cash without loss of value
D) convertible to cash within 1 year
25) The Hummel Corporation reported the following income statement and balance
sheet amounts and additional information for the end of the current year.
Inventory and prepaid expenses account for $28,000 of the current year’s current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company’s current ratio for the current year?
A) 1.27
B) 2.55
C) 0.79
D) 0.35
26) Einstein Company is preparing its cash budget for the upcoming month. The
beginning cash balance for the month is expected to be $14,000. Budgeted cash receipts
are $84,000, while budgeted cash disbursements are $72,000. Einstein Company wants
to have an ending cash balance of $40,000. The excess (deficiency) of cash available
over disbursements for the month would be
A) $170,000
B) $(26,000)
C) $112,000
D) $26,000
27) With respect to total variable costs, which of the following statements is TRUE?
A) They will remain the same as production levels change within the relevant range
B) They will decrease as production decreases within the relevant range
C) They will decrease as production increases within the relevant range
D) They will increase as production decreases within the relevant range
28) Under a perpetual inventory system, the journal entry needed to record the sale of a
job includes a
A) debit to cost of goods sold and credit to sales revenue
B) debit to finished goods inventory and credit to cost of goods sold
C) debit to sales revenue and credit to accounts receivable
D) debit to accounts receivable and credit to sales revenue
29) Morgan Company uses a job costing system. Morgan Company estimated
manufacturing overhead costs for the year at $330,000, based on 60,000 estimated
direct labor hours. Actual direct labor hours for the year totaled 75,000. Actual
manufacturing overhead for the year was $384,700.
By how much was manufacturing overhead overallocated or underallocated for the
year?
A) $27,800 overallocated
B) $27,800 underallocated
C) $54,700 overallocated
D) $54,700 underallocated
30) Brigg’s Breakfast Appliances manufactures two products: Waffle Makers and
Coffee Makers. The following data are available:
The company can manufacture two waffle makers per machine hour and three coffee
makers per machine hour. The company’s production capacity is 1,200 machine hours
per month.
What is the contribution margin ratio for waffle makers?
A) 30.23%
B) 62.50%
C) 166.67%
D) 137.50%
31) Cowell Corporation is considering an investment in new equipment costing
$155,000. The equipment will be depreciated on a straight-line basis over a five-year
life and is expected to generate net cash inflows of $45,000 the first year, $65,000 the
second year, and $90,000 every year thereafter until the fifth year. What is the payback
period for this investment? The equipment has no residual value.
A) 2.04 years
B) 3.44 years
C) 1.72 years
D) 2.50 years
32) If you invest $5,000 at the end of every year for nine years at an interest rate of 6%,
the balance of your investment in 5 years will be closest to
A) $6,690
B) $28,185
C) $21,060
D) $25,000
33) Neon Company manufactures widgets. The following data is related to sales and
production of the widgets for last year.
Using absorption costing, what is operating income for last year?
A) $ 39,300
B) $ 66,300
C) $219,700
D) $143,000
34) Which type of company utilizes managerial accounting?
A) Service
B) Manufacturers
C) Retailers
D) All of the above
35) Service firms develop a predetermined rate for some costs. This rate is called the
A) labor rate
B) direct cost rate
C) indirect cost allocation rate
D) hourly cost rate
36) Alexander Inc. uses activity-based costing. The company produces two products:
Snaps and Pops. The expected annual production of Snaps is 1,500 units, while the
expected annual production of Pops is 2,200 units. There are three activity cost pools:
Assembly, Testing, and Packing. The estimated costs and activities for each of these
three activity pools follows:
The overhead cost per unit of Pops would be closest to
A) $15.30
B) $5.32
C) $7.80
D) $31.00
37) Which of the following activities is not included in the value chain?
A) Reporting
B) Design
C) Production
D) Customer service
38) Piatt Company expects cash sales for July of $15,000, and a 26% monthly increase
during August and September. Credit sales of $12,000 in July should be followed by
30% increases during August and September. What are budgeted cash sales and
budgeted credit sales for September respectively?
A) $19,500 and $15,120
B) $25,350 and $19,051
C) $18,900 and $15,600
D) $23,814 and $20,280