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
In a common-sized income statement, 100% is the
a. net cost of goods sold
b. net income
c. gross profit
d. sales
A cost object indicates how costs are related or identified.
a. True
b. False
In a lean environment, operations only respond to customer orders.
a. True
b. False
Department B had 3,000 units in Work in Process that was 25% completed at the
beginning of the period at a cost of $12,500. 13,700 units of direct materials were added
during the period at a cost of $28,700. 15,000 units were completed during the period,
and 1,700 units were 95% completed at the end of the period. All materials are added at
the beginning of the process. Direct labor was $32,450 and factory overhead was
$18,710.
The number of equivalent units of production for the period for materials, if the first-in,
first-out method is used to cost inventories was
a. 16,700
b. 12,000
c. 1,700
d. 13,700
Hill Co. can further process Product O to produce Product P. Product O is currently
selling for $60 per pound and costs $42 per pound to produce. Product P would sell for
$82 per pound and would require an additional cost of $13 per pound to produce.
The differential revenue of producing Product P is $82 per pound.
a. True
b. False
The FIFO method of process costing is simpler than the Average cost method.
a. True
b. False
The following items are reported on Denver Company’s balance sheet:
Determine (a) the current ratio and (b) the quick ratio. Round to one decimal place.
The St. Augustine Corporation originally budgeted for $360,000 of fixed overhead at
100% normal production capacity. Production was budgeted to be 12,000 units. The
standard hours for production were 5 hours per unit. The variable overhead rate was $3
per hour. Actual fixed overhead was $360,000 and actual variable overhead was
$170,000. Actual production was 11,700 units.
The fixed factory overhead volume variance is
a. $9,000 favorable
b. $9,000 unfavorable
c. $5,500 favorable
d. $5,500 unfavorable
ABC Corporation has three service departments with the following costs and activity
base:
ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and
activity information are as follows:
What will the income of the Super Division be after all service department allocations?
a. $300,000
b. $325,000
c. $550,000
d. $200,000
If in evaluating a proposal by use of the net present value method there is an excess of
the present value of future cash inflows over the amount to be invested, the rate of
return on the proposal is less than the rate used in the analysis.
a. True
b. False
The point where the profit line intersects the horizontal axis on the profit-volume chart
represents
a. the maximum possible operating loss
b. the maximum possible operating income
c. the total fixed costs
d. the break-even point
Remain the same in total dollar amount as the level of activity changes
Match the following terms with their definitions.
a. Relevant range
b. Break-even point
c. Contribution margin
d. Fixed costs
e. Variable costs
Investment centers differ from profit centers in that they
a. are responsible for net income only
b. are able to invest in assets
c. have less responsibilities than cost centers and profit centers
d. are only responsible for revenues
Costs of failing to control quality include prevention costs and external failure costs.
a. True
b. False
Reducing wait time is directly linked to reducing inventory.
a. True
b. False
Comparative information taken from the Friction Company’s financial statements is
shown below:
Year 2 Year 1
(a) Notes receivable $ 10,000 $ 0
(b) Accounts receivable 106,200 90,000
(c) Retained earnings 30,000 (40,000)
(d) Sales 654,000 600,000
(e) Operating expenses 160,000 200,000
(f) Income taxes payable 28,000 20,000
Using horizontal analysis, show the percentage change and direction (increase or
decrease) from Year 1 to Year 2 with Year 1 as the base year.
The auditor’s report is where the auditor certifies that the financial statements are
correct and accurate.
a. True
b. False
Direct labor cost is an example of a controllable cost for the supervisor of a
manufacturing department.
a. True
b. False