If income from operations for a division is $30,000, sales are $263,750, and invested
assets are $187,500, the investment turnover is 1.3.
a. True
b. False
In a vertical analysis, the base for cost of goods sold is
a. total selling expenses
b. sales
c. total expenses
d. gross profit
The responsibility for coordinating the preparation of a master budget should be
assigned to the CEO of a firm.
a. True
b. False
In a lean environment, raw materials are delivered more frequently than in a traditional
environment.
a. True
b. False
Conversion costs are usually incurred evenly throughout a process.
a. True
b. False
Which is the best example of a decentralized operation?
a. one owner who prepares plans and makes decisions for the entire company
b. each unit is responsible for their own operations and decision making
c. in a major company, operating decisions are made by top management
d. none of these, all are examples of a centralized operation
The following is a list of costs incurred by several business organizations:
(a) Telephone cable for a telephone company
(b) Membership fees for a health club for executives
(c) Salary of the director of internal auditing
(d) Long-distance telephone bill for calls made by salespersons
(e) Carrying cases for a manufacturer of video camcorders
(f) Cotton for a textile manufacturer of blue jeans
(g) Bandages for the emergency room of a hospital
(h) Cost of company holiday party
(i) Electricity used to operate factory machinery
(j) State unemployment compensation taxes for factory workers
(k) Gloves for factory machine operators
(l) Fees paid for lawn service for office grounds
(m) Salary of secretary to vice-president of finance
(n) Salary of secretary to vice-president of marketing
(o) Production supervisor’s salary
(p) Engine oil for manufacturer and distributor of motorcycles
(q) Oil lubricants for factory plant and equipment
(r) Cost of a radio commercial
(s) Depreciation on factory equipment
(t) Wages of checkout clerk in company-owned retail outlet
(u) Maintenance and repair costs for factory equipment
(v) Depreciation on office equipment
(w) Bonuses paid to salespersons
(x) Insurance on factory building
(y) Training for accounting personnel on use of microcomputer
(z) Steel for a construction contractor
Classify each of the preceding costs as product costs or period costs. For those costs
classified as product costs, indicate whether the product cost is a direct materials cost,
direct labor cost, or factory overhead cost. For those costs classified as period costs,
indicate whether the period cost is a selling expense or an administrative expense. Use
the following tabular headings for preparing your answer. Place an X in the appropriate
column.
The Cavy Company estimates that the factory overhead for the following year will be
$1,250,000. The company has decided that the basis for applying factory overhead
should be machine hours, which is estimated to be 40,000 hours. The machine hours for
the month of April for all of the jobs was 4,780. If the actual factory overhead totaled
$141,800, determine the over- or under applied amount for the month.
a. $7,575 under applied b. $35,220 under applied
c. $7,575 over applied d. $35,220 over applied
Combines market-based pricing with a cost-reduction emphasis
Match the definitions that follow with the term (a’“e) it defines.
a. Demand-based concept
b. Competition-based concept
c. Product cost concept
d. Target costing
e. Production bottleneck
Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income
from operations amounting to $302,500, and a desired minimum rate of return of 15%.
The investment turnover for Chicks is
a. 1.3
b. 1.5
c. 1.0
d. 1.1
Prime costs consists of direct materials, indirect materials, and direct labor.
a. True
b. False
Squirrel Co. operates in a lean manufacturing environment. For June production,
Squirrel purchased 6,000 units of raw materials at $6.00 per unit on account. The
journal entry required to record this transaction is:
a. Raw and In Process Inventory Accounts Payable 36,000
36,000
b. Cost of Goods Manufactured Accounts Payable 36,000
36,000
c. Finished Goods Accounts Payable 36,000
36,000
d. Raw Materials Inventory Accounts Payable 36,000
36,000
Which of the following is not a characteristic evaluated in ratio analysis?
a. liquidity
b. profitability
c. solvency
d. marketability
Goods that are part way through the manufacturing process, but not yet complete, are
referred to as materials inventory.
a. True
b. False
In the manufacture of 10,000 units of a product, direct materials cost incurred was
$165,000, direct labor cost incurred was $105,000, and applied factory overhead was
$53,000. What is the total conversion cost?
a. $218,000
b. $158,000
c. $323,000
d. $53,000
What term is used to describe the process of monitoring operating results and
comparing actual results with the expected results?
a. improving
b. controlling
c. directing
d. planning