When an investing company owns less than 50 percent of another company, the
companies must prepare consolidated financial statements.
Assume a company uses process costing. When factory overhead is applied to the units
in production, Finished Goods Inventory is the Debit part of the journal entry.
Variable overhead costs may have a production volume variance.
A sole proprietorship is a business organized as a separate legal entity and owned by its
stockholders.
Management control systems in nonprofit organizations will never be as highly
developed as in profit-seeking firms because output measurements are more difficult.
Qualitative information can influence decisions to add or drop a department.
There is no production volume variance when expected production volume equals
actual production volume.
Treasury stock is a deduction from total stockholders’ equity.
Some backflush costing systems eliminate the Finished Goods Inventory account.
In an absorption-costing income statement, revenue less variable manufacturing costs is
equal to the gross margin.
A static budget is prepared for one expected level of activity.
When a company purchases inventory for cash, the net effect on the amount of total
assets is zero.
A merchandising company has Raw Materials Inventory.
Costs can be classified as direct or indirect with respect to a particular cost object.
A decision made during long-range planning includes whether to delete a product from
a company’s product line.
An engineering analysis is often not timely in measuring the cost function.
Conflicts in the decision-making process can arise when superiors evaluate a manager’s
performance using a model consistent with the decision model used by the manager.
On the income statement, the contribution margin is computed using variable
manufacturing costs and variable selling and administrative costs.
Additional costly information should be acquired when the expected benefit of an
improved decision exceeds the cost of the information.
A major drawback of using historical results for judging current performance is that
inefficiencies may be concealed in past performance.
Costs can be classified as direct or indirect with respect to a particular cost object.
Some intangible assets are depreciated.
Responsibility centers usually have a single goal that the management control system
monitors.
Liquidity ratios focus on whether there are sufficient current assets to satisfy current
liabilities as they come due.
Total static budget variances are equal to the sum of activity-level variances and
flexible budget variances.
Cash dividends declared are an addition to Retained Earnings on the Retained Earnings
Statement.
An assumption of the CVP analysis is that changes in efficiency are expected.
The wages of the janitor in the factory are direct costs for a manufactured product.
Capital turnover can be increased by decreasing investment.
Measures of performance do not have to be consistent with organizational goals.
Marketing is the function of the value chain that involves ________.
A) the mechanism by which a company delivers products or services to the customer
B) the manner by which individuals or groups learn about the value and features of
products or services
C) selling activities and delivery activities
D) selling activities and customer service
Customer profitability does NOT depend on ________.
A) gross margin on products purchased by customer
B) cost of order changes
C) cost of sales returns
D) transfer prices between producing departments
A spreadsheet can be used to prepare ________.
A) the operating budget
B) the financial budget
C) schedules from the master budget
D) all of the above
Gnat Company reported the following information about the production and sale of its
only product during the first month of operations:
Selling price per unit $300
Sales $480,000
Direct materials used $220,000
Direct labor $200,000
Variable factory overhead $60,000
Fixed factory overhead $80,000
Variable selling and administrative expenses $20,000
Fixed selling and administrative expenses $10,000
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 400 units
Under variable costing, the operating income or loss is ________.
A) $(6,000)
B) $(14,000)
C) $10,000
D) $41,000
In relation to a cost function, the term reliability means ________.
A) whether the costs and activities can be easily observed
B) whether the cost function conforms to a given mathematical model
C) how well the cost function predicts future costs
D) how well the cost function explains past cost behavior
Landslide Company has two service departments, Maintenance and Human Resources.
Landslide Company also has two production departments, Mixing and Finishing.
Maintenance costs are allocated based on square footage while Human Resources costs
are allocated based on number of employees. The following information has been
gathered for the current year:
Human
Maintenance Resources Mixing Finishing
Direct costs $126,000 $84,000 $105,000 $175,000
Square footage 800 400 1,600 1,200
Number of employees 8 12 24 32
If the step-down method is used to allocate service department costs, and the
Maintenance Department is allocated first, the amount of costs allocated from the
Maintenance Department to the Mixing Department is ________.
A) $36,000
B) $42,000
C) $42,750
D) $63,000
In a graph of a mixed cost function, the y-axis is ________ and the x-axis is ________.
A) fixed cost; cost driver activity
B) fixed cost; variable cost per unit
C) mixed cost; volume in units
D) cost; cost driver activity
Historical cost is widely used for asset valuation in calculating return on investment
because ________.
A) it reports the replacement cost of long-term assets
B) it is more subjective than other approaches
C) it requires additional data collection
D) the cost of obtaining additional data exceeds the benefit
In nonprofit organizations, a program is defined as a(n) ________.
A) identifiable group of activities that produces outputs in the form of consumable
products
B) identifiable group of activities that produces outputs in the form of services
C) class of products
D) none of the above
Donahoo Manufacturing Company had the following information available for the year:
Direct materials used $44,000
Direct labor costs incurred $7,700
Indirect labor costs incurred $3,030
Depreciation Expense on factory building $19,000
Depreciation Expense on factory machines $100,000
Insurance Expense on factory building $1,200
Depreciation Expense on office equipment $12,000
Insurance expense on corporate office $1,300
Supplies Expense for factory $5,000
Utilities Expense for factory $2,000
Wages Expense for factory janitors $5,000
Lease Expense for factory computers $10,000
Finished Goods Inventory, end of year $32,000
Finished Goods Inventory, beginning of year $12,000
Work-In-Process Inventories and Raw Materials Inventories were negligible at the
beginning and end of the year.
Required:
A) Compute the Cost of Goods Manufactured for the year.
B) Compute the Cost of Goods Sold for the year.
Georgia Company has the following data available:
December December
31, 2011 31, 2012
Fixed Assets $125 $125
Accumulated Depreciation $110 $117
Long-term debt $125 $5
Common stock $300 $400
Retained earnings $100 $120
No dividends were declared or paid for the year ending December 31, 2012. What is the
net cash flow from financing activities for the year ended December 31, 2012?
A) $20 cash inflow
B) $20 cash outflow
C) $100 cash inflow
D) $120 cash outflow
Smith Company has developed the following information about two products:
Cost Per Unit Cost Per Unit
Approach Product 1 Product 2
Traditional $5,400 $2,500
ABC $6,000 $2,400
If managers believe the ABC approach is more accurate to cost products than the
traditional approach, then ________.
A) the traditional approach underestimates the profitability of Product 1 and
overestimates the profitability of Product 2
B) the traditional approach overestimates the profitability of Product 1 and
underestimates the profitability of Product 2
C) the ABC approach underestimates the profitability of Product 1 and overestimates
the profitability of Product 2
D) the ABC approach overestimates the profitability of Product 1 and underestimates
the profitability of Product 2
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. Neither
product has enough demand to use all of the plant capacity, but the demand for both
products exceeds the plant capacity. Which product or products should be
manufactured?
A) 5,000 units of Product 1 and 0 units of Product 2
B) 0 units of Product 1 and 5,000 units of Product 2
C) make Product 1 first until meet customer demand, then make Product 2
D) make Product 2 first until meet customer demand, then make Product 1
Gokey Company reports the following information:
Net operating profit after taxes $400,000
Adjusted net operating profit after taxes $570,000
Average invested capital $600,000
Adjusted average invested capital $700,000
After-tax cost of capital 10%
The adjusted figures reflect adjustments used by Stern Stewart & Company. What is the
EVA for Gokey Company?
A) $330,000
B) $340,000
C) $500,000
D) $510,000
Spitzer Company is considering two investments. If the differential approach to
investment decisions is used, which of the following steps is NOT used?
A) list the differences in cash flows for each investment for each year
B) calculate the net present value of the differential cash flows
C) identify the relevant cash flows
D) calculate the net present value of the cash flows for each investment
An example of secured bonds is ________.
A) debentures
B) zero coupon bonds
C) mortgage bonds
D) serial bonds
To construct the Total Cost line on a cost-volume-profit graph, plot ________ and then
plot ________.
A) mixed costs; step costs
B) step costs; mixed costs
C) fixed costs; variable costs
D) fixed costs; fixed costs plus variable costs
The following information is available for Maher Manufacturing Company.
— Direct materials price standard is $3.25 per pound.
— Direct materials quantity standard is six pounds per finished unit.
— Budgeted production is 25,000 finished units.
— 175,000 pounds of direct materials were purchased for $525,000.
— 175,000 pounds of direct materials were used in production.
— 25,600 finished units of product were produced.
What is the direct materials quantity variance?
A) $21,400 Unfavorable
B) $21,400 Favorable
C) $69,550 Unfavorable
D) $69,550 Favorable
An entity’s economic obligations to nonowners are called ________.
A) owners’ equity
B) liabilities
C) assets
D) retained earnings
Branson Company purchased 40% of the outstanding shares of Missouri Company as a
long-term investment. At the end of the year, the market value of the shares increased.
The increase in market value of Missouri Company’s shares will affect Branson
Company in which of the following ways?
A) increasing assets and increasing stockholders’ equity
B) decreasing investments and increasing cash
C) increasing investments and increasing stockholders’ equity
D) no effect
The Kaprelian Company reports the following information:
Sales for the year ended December 31, 2012 $106,950
Gross profit for the year ended December 31, 2012 $45,150
Net income for the year ended December 31, 2012 $7,300
Total Current Assets, December 31, 2012 $18,700
Total Current Liabilities, December 31, 2012 $7,600
Total Assets, December 31, 2012 $48,400
Total Liabilities, December 31, 2012 $20,850
Average total common shares outstanding in 2012 1,000
Market price per share, December 31, 2012 $75.00
Dividends per share, for the year ended December 31, 2012 $5.00
What is the dividend yield at December 31, 2012?
A) 6.7%
B) 9.7%
C) 25.8%
D) 68.2%
Garcia Company planned to produce 12,000 units. This level of activity required 40
setups at a cost of $18,000 plus $500 per setup. Actual production was 10,000 units,
requiring 15 setups. Actual setup cost was $26,000. What is the static budget amount
for total setup costs?
A) $21,000
B) $25,500
C) $26,000
D) $38,000
Which statement would NOT be a reason for a flexible budget variance?
A) Material prices were different than expected.
B) Labor prices were different than expected.
C) Actual volume of activity was different than expected.
D) Amount of labor used per unit of output was different than expected.
A cause and effect relationship between a ________ and a ________ is desirable in
order to obtain accurate and useful cost functions.
A) cost driver; cost function
B) cost function; resource cost
C) cost driver; resource cost
D) step cost; capacity cost
The income statement summarizes a company’s operating performance ________ and
the balance sheet shows a company’s financial position ________.
A) at a point in time; over a period of time
B) at a point in time; at a point in time
C) over a period of time; over a period of time
D) over a period of time; at a point in time
For nonprofit organizations, the stockholders’ equity section of the balance sheet is
replaced with ________.
A) retained earnings
B) partners’ capital
C) partners’ withdrawals
D) net assets
When companies develop cost management systems, which of the following purposes
of cost allocation usually dominates?
A) to predict the economic effects of strategic and operational control decisions
B) to provide the desired motivation and to give feedback for performance evaluation
C) to compute income and asset valuations for financial reporting
D) to justify costs or obtain reimbursement
In the capital budgeting process, accountants are NOT involved in ________.
A) follow-up monitoring of investments
B) choosing which investments to make
C) gathering data to aid the investment decision
D) identifying potential investments
A company identifies the following goals and objectives:
Increase sales 10 percent each year.
Increase profits 5 percent each year.
Increase total plant assets 5 percent each year.
Which of the following budgets identifies the overall goals and objectives of an
organization?
A) sales budget
B) master budget
C) strategic plan
D) financial planning model
Herman Loebl Company, a producer of salsa, has the following information:
Income tax rate 30%
Selling price per unit $8.00
Variable cost per unit $3.00
Total fixed costs $90,000.00
The contribution margin per unit is ________.
A) $2.00
B) $3.00
C) $5.00
D) $8.00
In make-or-buy decisions for a part for a product, relevant costs include ________.
A) some variable costs of making the part
B) all variable costs of making the part
C) fixed costs that can be avoided in the future if the part is purchased
D) B and C