The economic production run quantity directly affects the
a. order point for raw material inventories.
b. safety stock for finished goods inventory.
c. level of finished goods inventory.
d. lead time for producing finished goods inventory.
Griffith Corporation
Griffith Corporation is considering an investment in a labor-saving machine.
Information on this machine follows:
Refer to Griffith Corporation. What is the internal rate of return on this project (round
to the nearest 1/2%)? Present value tables or a financial calculator are required.
a. 37.5%
b. 25.0%
c. 10.5%
d. 13.5%
Plastic used to manufacture dolls is a
a. no yes yes
yes
b. yes no yes
no
c. yes yes no
yes
d. yes yes yes
no
For a profitable company, an increase in the rate of depreciation on a specific project
could
a. increase the project’s profitability index.
b. increase the project’s payback period.
c. decrease the project’s net present value.
d. increase the project’s internal rate of return.
Under absorption costing, if sales remain constant from period 1 to period 2, the
company will report a larger income in period 2 when
a. period 2 production exceeds period 1 production.
b. period 1 production exceeds period 2 production.
c. variable production costs are larger in period 2 than period 1.
d. fixed production costs are larger in period 2 than period 1.
Lindburgh Company
Lindburgh Company manufactures toy airplanes. Information on Lindburgh Company’s
labor costs follow:
The following information applies to the upcoming month of July for Lindburgh
Company:
Refer to Lindburgh Company. What amount of budgeted labor cost would appear in the
July selling, general, and administrative expense budget?
a. $10,000
b. $16,000
c. $15,000
d. $23,000
Kaizen means
a. doing it the Japanese way.
b. continuous improvement.
c. employee empowerment.
d. implementation of a centralized organizational structure.
A company annually consumes 10,000 units of Part C. The carrying cost of this part is
$2 per year and the ordering costs are $100. The company uses an order quantity of 500
units. By how much could the company reduce its total costs if it purchased the
economic order quantity instead of 500 units?
a. $500
b. $2,000
c. $2,500
d. $0
Which of the following groups are external users of data gathered by a management
information system?
a. yes no
yes
b. no no
no
c. no yes
yes
d. yes yes
yes
Andersen Corporation
Andersen Corporation has the following information for the current month:
All materials are added at the start of the production process. Andersen Corporation
inspects goods at 75 percent completion as to conversion.
Refer to Andersen Corporation. What are equivalent units of production for conversion
costs, assuming FIFO?
a. 97,750
b. 100,000
c. 101,750
d. 104,500
Painter Corporation
Painter Corporation has the following information for the current month:
All materials are added at the start of the production process. Painter Corporation
inspects goods at 75 percent completion as to conversion.
Refer to Painter Corporation. What are equivalent units of production for material,
assuming FIFO?
a. 100,000
b. 96,500
c. 95,000
d. 120,000
Stewart Company
The following information relates to financial projections of Stewart Company:
Refer to Stewart Company. If Stewart Company achieves its projections, what will be
its degree of operating leverage?
a. 6.00
b. 1.20
c. 1.68
d. 2.40
The Institute of Management Accountants issues
a. Statements on Accounting Research for Managers.
b. Statements on Management Accounting.
c. Statements on Managerial and Cost Accounting.
d. Cost Accounting Standards.
The net realizable value approach is normally used when the NRV is expected to be
a. yes yes
b. no yes
c. no no
d. yes no
For purposes of allocating joint costs to joint products using the relative sales value at
split-off method, the costs beyond split-off
a. are allocated in the same manner as the joint costs.
b. are deducted from the relative sales value at split-off.
c. are deducted from the sales value at the point of sale.
d. do not affect the allocation of the joint costs.
Stewart Company
The following information relates to financial projections of Stewart Company:
Refer to Stewart Company. How many units would Stewart Company need to sell to
earn a profit before taxes of $10,000?
a. 25,714
b. 10,000
c. 8,571
d. 12,000
In the South Division of Occident Company, segment income for the most recent year
exceeded residual income by $15,000. Also, return on investment exceeded the target
rate of return by 10%. What was the level of investment in the South Division for the
most recent year?
a. $ 15,000
b. $100,000
c. $150,000
d. An answer can’t be determined from this information.
Austin Company
Austin Company has established a target rate of return of 15% for all divisions. For the
most recent year, Waterloo Division generated sales of $12,000,000 and expenses of
$9,000,000. Total assets at the beginning of the year were $7,000,000 and total assets at
the end of the year were $9,000,000.
Refer to Austin Company. For the most recent year, what was Waterloo Division’s
return on investment?
a. 18.75%
b. 33.33%
c. 37.50%
d. 42.86%
The costing system that classifies costs by functional group only is
a. standard costing.
b. job order costing.
c. variable costing.
d. absorption costing.
Blue Mountain Company manufactures a single product. In the prior year, the company
had sales of $90,000, variable costs of $50,000, and fixed costs of $30,000. Blue
Mountain expects its cost structure and sales price per unit to remain the same in the
current year, however total sales are expected to increase by 20 percent. If the current
year projections are realized, net income should exceed the prior year’s net income by:
a. 100 percent.
b. 80 percent.
c. 20 percent.
d. 50 percent.
Which of the following costs would not be accounted for in a company’s recordkeeping
system?
a. an unexpired cost
b. an expired cost
c. a product cost
d. an opportunity cost
Economic value added (EVA) is a more appropriate performance measure when there is
a large difference between the market value of invested capital and the book value of
assets.
Simultaneous engineering helps companies accomplish which of the following?
a. no no
b. yes yes
c. yes no
d. no yes
The Du Pont model measures ROI as it is affected by
a. contribution margin and asset turnover.
b. profit margin and asset turnover.
c. asset turnover.
d. profit margin.
A cost management system would be an integral part of implementing which of the
following?
a. no yes
yes
b. no no
no
c. yes no
yes
d. yes yes
no
A change in the discount rate used to evaluate a specific project will affect the project’s
a. life.
b. payback period.
c. net present value.
d. total cash flows.
The minimum selling price that should be acceptable in a special order situation is
equal to total
a. production cost.
b. variable production cost.
c. variable costs and avoidable fixed costs.
d. production cost plus a normal profit margin.
Lynch Corporation bought a piece of machinery. Selected data is presented below:
Present value tables or a financial calculator are required.
The initial cost of the machinery was
a. $201,496
b. $208,493
c. $215,390
d. $230,342
A master budget contains which of the following?
a. yes yes yes
b. no no
yes
c. no no no
d. yes no
yes
During which stage of the product life cycle will a company witness the highest profit?
a. development
b. maturity
c. growth
d. decline
Baker Company
Baker Company produces three products: A, B, and C from the same process. Joint
costs for this production run are $2,100.
If the products are processed further, Baker Company will incur the following disposal
costs upon sale: A, $3.00; B, $2.00; and C, $1.00.
Refer to Baker Company. Using sales value at split-off, what amount of joint processing
cost is allocated to Product C (round to the nearest dollar)?
a. $959
b. $725
c. $700
d. $416
Applied overhead consists of which of the following?
a. actual activity times predetermined overhead rate
b. estimated activity times predetermined overhead rate
c. actual activity times actual overhead rate
d. estimated activity times actual overhead rate
In a special order decision, unavoidable current fixed costs are taken into consideration
in setting a sales price.
Costs that support a product type or process are referred to as
________________________.
A credit to the Factory Overhead account represents actual overhead costs.
Castle Homes Corporation
The Carpet Division of Castle Homes Corporation manufactures a single grade of
residential grade carpeting. The division has the capacity to produce 500,000 square
yards of carpet each year. Its current costs and revenues are shown here:
The Housing Division currently purchases 40,000 yards of carpeting (of the grade
produced by the Carpet Division) each year at a cost of $6.50 per square yard from an
outside vendor.
Refer to Castle Homes Corporation. If the autonomous Housing and Carpet Divisions
enter negotiations on the internal transfer of 40,000 square yards of carpeting, what is
the maximum price that will be considered?
Responsibility reports reflect the flow of information from operational units to top
management.
Financial accounting is most concerned with addressing the needs of individual
departments of the firm.
Normal continuous losses are absorbed by all units in ending inventory and transferred
out on a EUP basis.
What are the three primary goals of the just-in-time (JIT) philosophy?
The quoted price for inventory minus discounts plus shipping charges is referred to as
the ______________________________.
Profit maximization is the major focus of value engineering.
Reworking a product is an appraisal cost.
Long-range planning carried out by top management is referred to as
______________________________.
A company that manufactures large quantities of homogenous goods will use a
job-order costing system.
Costs that are incurred after the split-off point in a production process are referred to as
______________________________.
When manufacturing overhead is applied to a job in process, the
account is debited