When there is no work in process inventory at the end of a period, cost accumulation
and reporting is extremely easy under process costing, as the product costs are simply
added up and divided evenly among the products produced.
Managerial accounting reports historical information, often with the purpose of
comparing actual results to budgeted results.
In preparing a common-size income statement, you express all revenue and expense
accounts as a percentage of net income.
Operating activities are those that affect a company’s investments in assets other than
current operating assets.
Activity-based costing information can be used to make decisions regarding pricing,
customer profitability, distribution channel profitability, and process improvement.
Nonfinancial measures, which are not based on accounting results, can be either
qualitative or quantitative.
If regular sales are given up to take a special order, the lost contribution margin on the
regular sales must be subtracted from the contribution margin of the special order to
arrive at the total impact on operating income.
Bethel Corporation ‘s Ambulance division reported net operating profits of $1,500,000
during the year. The division absorbed common fixed corporate expenses of $900,000.
The division ‘s segment margin is
a. $(600,000).
b. $900,000.
c. $600,000.
d. $2,400,000.
Which of the following is not a standard of the IMA statement of ethical professional
practice?
a.Competence
b.Integrity
c.Objectivity
d.Confidentiality
Melrose Manufacturing produces gourmet blackberry preserves. Melrose based its
current year budget on a production level of 540,000 jars of preserves using ½ hour
direct labor time for each jar (which includes hand-sorting and trimming the berries).
Total budgeted variable overhead for the year was $1,242,000. During the year, Melrose
used 280,000 direct labor hours to produce 550,000 jars of blackberry preserves. Actual
variable overhead for the year was $1,246,000. What is Melrose’s variable overhead
spending variance?
a. $4,000 unfavorable
b. $4,000 favorable
c. $23,000 favorable
d. $23,000 unfavorable
It may appear that all unprofitable customers should be dropped. However, before any
action is taken, managers should evaluate all the implications of the action for the
affected customer, for other customers, and for the company.
Required:
a. Explain three implications for the affected customer.
b. Explain three implications for other customers.
c. Explain three implications for the company.
The basic managerial functions that help managers ensure that enough cash is available
to run the business is the function of
a. Planning
b. Controlling
c. Evaluation
d. Decision making
Which of the following is formula for calculating the activity rate in an activity-based
costing system?
a. Activity cost pool resources divided by activity driver
b. Activity driver divided by activity cost pool resources
c. Activity cost pool resources divided by estimated total cost pool
d. Estimated cost pool divided by activity cost pool resources
Which of the following items is not classified as indirect labor for a furniture
manufacturing company?
a. The production foreman’s salary
b. Wages paid to the workers on the assembly line
c. The forklift driver who delivers raw materials to the production floor
d. All of these answer choices are classified as indirect labor.
The 2013 and 2014 partial balance sheets for Myers Manufacturing Company appear
below:
Required: a. Calculate Myers’ current ratio for 2014. b. Calculate Myers’ debt ratio for
2014. c. Calculate Myer’s debt-to-equity ratio for 2014.
The information provided by managerial accountants is not distributed to the general
public because
a.To do so could provide competitors with vital information about corporate strategies
and capabilities.
b.To do so would be against the Institute of Management Accountants ‘ code of conduct.
c.To do so would be against generally accepted accounting principles.
d.To do so would violate federal trade laws.
Johnston Manufacturing Company purchased 14,000 switches to make 6,000 units. The
standard allows for 2 switches per unit. The company actually used 12,500 to produce
the 6,000 units. Johnson budgeted $0.75 per switch, but because they received a
discount for purchasing more than 10,000 switches, they received a discount of $0.05
per switch and paid $0.70 each. What is Johnston’s direct materials price variance for
the period?
a. $500 favorable
b. 600 favorable
c. $625 favorable
d. $700 favorable
The formula for determining the common-size percentage for liabilities is
Assume you have been hired by a company that is considering implementing an
activity-based costing system. One of your co-workers is not eager to change and
believes the benefits of moving to activity-based costing will not be worth the time and
effort of implementing the new system. Explain to your co-worker the characteristics of
an organization that make it a good candidate to implement activity-based costing and
how activity-based costing might benefit the company.
What is the minimum acceptable transfer price for a division that has excess operating
capacity?
Adams Corporation manufactures stained glass windows. Since each job is unique in
color and design, Adams uses a job-order costing system. Adams has provided you with
the following January 1, 2014 account balances.
During 2014, the following transactions occurred:
1> Adams purchased raw materials for $160,000 on account
2> Adams used $150,000 of raw materials in production. Eighty percent were direct
materials and 20 percent were indirect materials.
3> $69,000 of direct labor and $27,000 of indirect labor was incurred and paid.
4> Other manufacturing overhead incurred on account totaled $52,000.
5> Adams completed production on goods costing $280,000.
6> Adams sales revenue was $510,000. All goods were sold on account.
7> Adams’ cost of goods sold was $320,000 before adjusting for over-/under-applied
overhead.
8> Adams applies overhead at 200% of direct labor cost.
9> Adams collected $530,000 from customers and paid $140,000 to vendors.
10> Adams closes over-/under-applied overhead to Cost of Goods Sold.
Describe the format for a variable costing income statement.