In job-order costing, the journal entry to record actual factory overhead costs incurred
would include a Credit to Factory Department Overhead Control.
A flexible budget is different from a variable budget.
If an investor uses the equity method to account for a long-term equity investment, then
the investor records income when the investee reports net income.
If the total sales-activity variance and the static-budget variance are equal, there is no
flexible budget variance.
When the actual production volume exceeds the expected production volume, the
production volume variance is favorable.
A management by objectives approach uses responsibility center budgets.
Determining the relationships among cost objects, activities, and resources is the second
step in the design of an ABC system.
Costs that can be allocated to a cost object are called direct costs.
Capacity costs are variable costs related to a desired level of production or service.
Evaluations of the responsibility center manager’s performance should ignore
uncontrollable costs.
An example of a strategic management decision is the establishment of a pricing policy
for a new product.
Liabilities are the entity’s economic obligations to owners.
Accounts payable, wages payable and income taxes payable are all considered to be
current liabilities.
Dividends paid are considered an expense on the income statement.
Return on sales can be increased by increasing expenses.
Financial planning models enable managers to get answers to “what-if” questions.
When managers make decisions, the accountant is seen as the technical expert on
financial analysis.
One of a controller’s responsibilities is risk management.
If the segments in a firm buy from the same outside suppliers all the time, they are good
candidates for decentralization.
Some intangible assets are depreciated.
The current ratio equals current assets divided by current liabilities.
Decentralization is more popular in nonprofit organizations than in profit-seeking
organizations.
The real rate of interest equals the risk-free rate plus the business-risk rate.
The logical cost driver for building rent cost of $10,000 is square feet. The cost object is
the assembly department in a factory.
In general, use of economic profit or EVA will promote goal congruence and lead to
better investment decisions than the use of ROI.
Retained earnings indicate the amount of cash available for distribution to shareholders.
Managerial effort does not necessarily have to accompany goal congruence.
Currently attainable standards do not make allowances for spoilage and waste.
Rent received in advance of the rental period would be considered to be a prepaid asset
by the landlord.
A scarce resource restricts or constrains the production or sale of a product.
Outsourcing is the purchase of products or services by a company from an outside
supplier.
The income statement measures performance over a given amount of time.
Activity-based costing systems should be used instead of traditional costing systems if
________.
A) indirect production costs are a large percentage of production costs
B) different products consume resources at different rates
C) only one product is produced
D) A and B
Lorna Company reported the following information about the production and sale of its
only product during the first month of operations:
Selling price per unit $65
Sales $78,000
Direct materials used $25,000
Direct labor $35,000
Variable factory overhead $15,000
Fixed factory overhead $10,000
Variable selling and administrative expenses $3,000
Fixed selling and administrative expenses $5,000
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 1,200 units
Under variable costing, the cost of ending inventory of finished goods is ________.
A) $35,000
B) $37,500
C) $39,000
D) $42,500
A ________ refers to the set of activities assigned to a manager or a group of managers
or other employees.
A) internal control system
B) management control system
C) responsibility center
D) quality control report
When a laptop computer is the cost object, the keyboard would be classified as a(n)
________.
A) direct cost
B) allocated cost
C) indirect cost
D) unallocated cost
Xerox Company has the following information available:
Selling price per unit $100
Variable cost per unit $45
Fixed costs per year $420,000
Expected sales per year (units) 20,000
If variable costs increase to $65 per unit, what is the break-even point in units?
A) 12,000
B) 13,000
C) 20,000
D) none of the above
During the month of May, Gonzalez Clothing transferred 140,000 shirts to Finished
Goods Inventory. There was no beginning work-in-process inventory. The company had
30,000 shirts in process at May 31 and the shirts were 50 percent complete with respect
to conversion costs. All direct materials are added at the beginning of the production
process. How many shirts were started during May?
A) 30,000
B) 110,000
C) 140,000
D) 170,000
Budgeting can result in incentives to lie and cheat that undermine ________.
A) a company’s ethical standards
B) a company’s value chain
C) standard of objectivity promulgated by the Institute of Management Accountants
D) none of the above
Managers apply two criteria to obtain accurate and useful cost functions. These criteria
are ________.
A) plausibility and believability
B) plausibility and reliability
C) reliability and validity
D) validity and plausibility
The following information pertains to the West Division of Burger Company:
Net sales $6,000
Variable costs:
Cost of merchandise sold 1,000
Operating expenses 450
Fixed costs:
Controllable by segment manager 1,600
Controllable by others 1,250
Unallocated costs 750
The contribution margin of the West Division is ________.
A) $2,750
B) $3,650
C) $4,350
D) $4,550
The following information is available for Nobelski Books and its two divisions,
Textbooks and Tablets.
Whole
Company Textbooks Tablets
Net sales $100,000 $50,000 $50,000
Fixed costs controllable by
Division Manager 16,500 12,500 4,000
Fixed costs controlled by others 8,000 5,000 3,000
Variable costs:
Cost of merchandise sold 24,500 17,500 7,000
Operating expenses 16,400 10,000 6,400
Unallocated costs 1,000
What is the contribution by segment for the Tablets Division?
A) $28,600
B) $29,600
C) $32,600
D) $36,600
Stewart Company has no beginning and ending inventories, and reports the following
information about its only product:
Direct materials used $29,000
Direct labor $17,000
Variable indirect production $13,000
Fixed indirect production $18,000
Variable selling and administrative expenses $22,000
Fixed selling and administrative expenses $11,000
Units produced and sold 10,000
Selling price per unit $25
Required:
A) Prepare an income statement using the contribution approach.
B) Prepare an income statement using the absorption approach.
When using the net present value method, if the net present value of a project is
negative, then the ________.
A) the project should be rejected
B) the project should be accepted
C) the project should be recalculated for missing cash inflows
D) none of the above
A company has 10,000 hours of capacity and manufactures two products. Product 1
takes 2 hours per unit. Product 2 takes 3 hours per unit. The contribution margin per
unit for Product 1 is $5. The contribution margin per unit for Product 2 is $6. The
demand for either product exceeds the factory capacity. Which product or products
should be manufactured?
A) 3,000 units of Product 1 and 2,000 units of Product 2
B) 2,500 units of Product 1 and 3,333 units of Product 2
C) make 5,000 units of Product 1 and 0 units of Product 2
D) make 3,333 units of Product 2 and 0 units of Product 1
Barnard Company owns a 60 percent interest in Simon Company. For the year ended
December 31, 2016, the net income of Barnard Company was $80 and the net income
of Simon Company was $10. What is the balance in the Noncontrolling Interests
account on the consolidated income statement for the year ending December 31, 2016?
A) $0
B) $4
C) $6
D) $48
Bruder Company produces one type of product. Total fixed costs are $100,000. Unit
variable costs are $6.00. The break-even point is 25,000 units. Planned unit sales are
30,000.
Required:
A) Compute the selling price per unit.
B) Compute the contribution-margin ratio.
C) Compute the break-even point in dollars.
________ is the excess of sales over the cost of goods sold.
A) Gross margin
B) Contribution-margin ratio
C) Variable-cost ratio
D) Contribution margin
Angelina Company manufactures plastic cups in one department. The following
information is available:
Work-In-Process Inventory, beginning 0
Units started 15,000
Units completed and transferred 12,000
Work-In-Process Inventory, end 3,000
Direct materials added $30,000
Direct labor $20,700
Factory overhead $10,350
The units in the ending Work-In-Process Inventory are 100 percent complete with
respect to direct materials and 60 percent complete with respect to conversion costs.
The cost of one completed unit is ________.
A) $4.07
B) $4.25
C) $4.42
D) $5.08
The following data has been assembled for John Company. Use the high-low method.
Month Cost Hours
January $24,400 2,000
February $39,000 2,200
March $35,280 2,750
April $36,400 3,500
May $40,000 4,000
The expected total cost at an operating level of 1,900 hours is ________.
A) $23,180
B) $23,620
C) $24,000
D) $24,400
Huntsman Company’s variable selling and administrative expenses are $48,000 at a
production level of 6,000 units. If the production level is 8,000 units, what are the
variable selling administrative expenses?
A) $48,000
B) $56,000
C) $64,000
D) $80,000
Downstairs Company has the following sales budget for the last six months of 2010:
July $100,000
August 80,000
September 110,000
October 80,000
November 100,000
December 94,000
Historically, the cash collection of sales has been as follows:
65% of sales collected in month of sale
25% of sales collected in month following sale
8% of sales collected in second month following sale
2% of sales uncollectible
What are the expected cash collections of sales in October?
A) $79,500
B) $85,900
C) $92,400
D) $99,500
An unfavorable variance occurs on a performance report when ________.
A) the actual cost is less than the budgeted cost
B) the actual revenue is greater than the budgeted revenue
C) the actual profit is greater than the budgeted profit
D) the actual revenue is less than the budgeted revenue
The function of the value chain that provides support activities to the customer is called
________.
A) marketing
B) distribution
C) customer service
D) consumer relations
Jorgensen Company manufactures generic notebooks. Material is introduced at the
beginning of the process in the Printing Department. Conversion costs are applied
uniformly throughout the process. The weighted-average method of process costing is
used. Data for the Printing Department for the month of June follow:
Work-In-Process Inventory, June 1:
Units 15,000
Direct materials (100% complete) $34,000
Conversion costs (30% complete) $14,000
Units started in June 65,000
Units completed in June 62,000
Work-In-Process Inventory, June 30 18,000
Direct materials added in June $285,000
Conversion costs added in June $210,000
With regard to the Work-In-Process Inventory on June 30, materials are 100 percent
complete and conversion costs are 60 percent complete. What are the equivalent units
for materials for June?
A) 62,000
B) 77,000
C) 80,000
D) 83,000
Which of the following is NOT a component of the financial budget?
A) capital budget
B) cash budget
C) budgeted balance sheet
D) budgeted income statement
Baldwin Company’s income statement reported income tax expense of $18,000. Income
tax payable at the beginning of the year was $5,000. Income tax payable at the end of
the year was $4,000. The cash paid for taxes was ________.
A) $15,000
B) $17,000
C) $19,000
D) $22,000
Each year, goodwill on the consolidated balance sheet is ________.
A) amortized
B) depreciated
C) evaluated by management to determine if it is impaired
D) ignored
Comparing a company’s debt-to-equity ratio for 2014 to the debt-to-equity ratios for
2014 from other companies in the same industry is called a(n) ________.
A) time-series comparison
B) benchmark comparison
C) cross-sectional comparison
D) efficient ratio analysis
When preparing a flexible budget income statement, ________ costs are constant at
different levels of activity.
A) variable
B) step
C) contributed
D) fixed
Kilsdonk Company has the following information available:
Budgeted cost of direct materials at 900,000 units $900,000
Budgeted cost of direct materials at 820,000 units $820,000
Actual cost of direct materials at 820,000 units $840,000
Actual level of output(units) 820,000
Planned level of output(units) 900,000
The cost driver of product costs is units of output. What is the static budget variance for
direct material costs?
A) $20,000 Unfavorable
B) $20,000 Favorable
C) $60,000 Favorable
D) $60,000 Unfavorable
If a company eliminates all discretionary costs due to a severe recession, this could
________.
A) ensure that the company reports a net loss
B) ensure that the company reports a net profit
C) reestablish a company’s competitive position in an industry
D) impair a company’s competitive position in an industry
Which of the following formulas should be used to allocate variable costs from service
departments to user departments?
A) budgeted unit rate × total budgeted units planned to be used
B) actual unit rate × total budgeted units planned to be used
C) budgeted unit rate × actual units used
D) actual unit rate × actual units used