A hotel has the following organizational goal: Increase employee satisfaction. Which
one of the following is the best performance measure of the organizational goal?
A) number of new employees trained
B) turnover rate of hotel employees
C) overall rating on employee service on guest satisfaction survey
D) percent of guests writing complaints about employees
For most organizations, an effective management control system requires performance
measures that are ________ and ________.
A) rolling; static
B) flexible; static
C) strategic; continuous
D) financial; nonfinancial
To compute contribution margin under variable costing, we deduct ________ and
________ from sales.
A) variable manufacturing costs; fixed manufacturing costs
B) variable selling costs; fixed manufacturing costs
C) variable administrative costs; fixed manufacturing overhead costs
D) variable manufacturing costs; variable selling and administrative costs
The Computer Department in a large company provides services to many departments.
The cost driver for costs in the Computer Department is the number of computer hours.
When allocating fixed costs of the Computer Department to a user department such as
Department A, which of the following formulas is used?
A) budgeted fixed cost × (budgeted hours to be used by Department A/total available
capacity hours of Computer Department)
B) budgeted fixed cost × (actual hours used by Department A/total available capacity
hours of Computer Department)
C) actual fixed cost × (budgeted hours to be used by Department A/total available
capacity hours of Computer Department)
D) actual fixed cost × (actual hours used by Department A/total available capacity
hours of Computer Department)
Budgeted cost rates are used for allocating variable costs of service departments to user
departments because ________.
A) it provides service departments a greater incentive to be efficient
B) it protects user departments from inefficiencies in service departments
C) it protects managers in service departments from inflation
D) A and B
Organizational learning can NOT be monitored by ________.
A) employee training time
B) employee turnover
C) employee satisfaction scores on internal surveys
D) percentage of employees with children
Cornish Company is preparing a cash budget for the month of June. The following
information is available:
Cash Balance, May 31, 2015 $11,000
Cash collections from customers in June 43,000
Depreciation expense in June 10,000
Cash paid for equipment in June 20,000
Cash paid for merchandise in June 20,000
Cash paid for operating expenses in June 20,000
Cash dividend paid in June 5,000
The minimum cash balance desired is $5,000. What are the net cash receipts and
disbursements for the month of June?
A) $(2,000)
B) $(3,000)
C) $(22,000)
D) $(32,000)
To determine the cost of serving a specific type of customer, such as the retail customer,
which of the following are followed?
A) first step, cost assignment and second step, cost allocation
B) first step, cost accumulation and second step, cost assignment
C) first step, cost allocation and second step, cost apportionment
D) first step, cost absorption and second step, cost attribution
ABC Division is in the United States with high income tax rates. ABC Division
produces a component for the Spain Division in a low income-tax-rate country. What
transfer price should ABC Division set for the component sold to the Spain Division to
minimize taxes?
A) ABC Division should set a high transfer price to maximize profits.
B) ABC Division should set a low transfer price to maximize profits.
C) ABC Division should set a high transfer price to minimize taxes.
D) ABC Division should set a low transfer price to minimize taxes.
Jackson Company collected $1,200 on account. Jackson will ________.
A) Debit Cash $1,200 and Credit Accounts Payable $1,200
B) Debit Accounts Receivable $1,200 and Credit Cash $1,200
C) Debit Accounts Payable $1,200 and Credit Cash $1,200
D) Debit Cash $1,200 and Credit Accounts Receivable $1,200
Bronski Corporation manufactures two products, Simple and Complex. The following
information was gathered:
Simple Complex
Selling price per unit $37.00 $26.00
Variable cost per unit 32.00 22.00
Total fixed costs are $18,000. Assume demand for either product exceeds the factory’s
capacity. It takes one hour of production time to make Simple and two hours to make
Complex. The annual capacity of the plant is 10,000 hours. How many units of Simple
and Complex should Bronski Corporation produce and sell to maximize profits?
A) 0 units of Simple and 5,000 units of Complex
B) 6,000 units of Simple and 3,000 units of Complex
C) 10,000 units of Simple and 0 units of Complex
D) 3,000 units of Simple and 6,000 units of Complex
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
Treasury stock is shown on the balance sheets as a deduction from ________.
A) total assets
B) total liabilities
C) total current assets
D) total stockholders’ equity
If a company allocates costs of central services to products based on sales, ________
should be used as the allocation base.
A) actual usage
B) estimated usage
C) actual sales
D) budgeted sales
In backflush costing, any remaining balance in the Conversion Costs account at the end
of the accounting period is charged to ________.
A) Cost of Goods Sold
B) Work-in-Process Inventory
C) Finished Goods Inventory
D) Direct Materials Inventory
Fast Company has just decided to outsource the production of a part for a product.
Assume Fast Company leaves the area of the manufacturing plant idle where it was
producing the outsourced part. It has no alternative uses of the plant. What is the
opportunity cost of the idle area of the manufacturing plant to Fast Company?
A) zero
B) definitely a negative number
C) the disposal value of the entire manufacturing plant
D) none of the above
When preparing consolidated financial statements, eliminating entries are made to
avoid double-counting ________.
A) assets only
B) liabilities only
C) assets, liabilities and stockholders’ equity
D) none of the above
California Company reports the following information:
12/31/14 12/31/15
Fixed Assets $330 $581
Less: Accumulated Depreciation (110) (127)
Net Fixed Assets $220 $454
Depreciation expense for the year ending December 31, 2015 is $17. No fixed assets
were sold during 2015. What is the net cash flow from investing activities for the year
ending December 31, 2015?
A) $17 cash inflow
B) $251 cash inflow
C) $251 cash outflow
D) $268 cash outflow
Randall Company acquired 40% of the voting stock of Boulder Company for $40
million. At the end of Year 1, Boulder Company reports net income of $15 million and
pays cash dividends of $5 million. At the end of Year 1, the market value of Randall
Company’s investment in Boulder Company is $44 million. What accounts on Randall
Company’s books would be affected by the dividends of Boulder Company?
A) none
B) Cash increase $2 million and Investment Revenue increases $2 million
C) Cash increase $5 million and Investment Revenue increases $5 million
D) Cash increase $2 million and Investments decrease $2 million
Which of the following is the benefit of depreciation expense on a plant asset when
considering investment decisions with taxes?
A) increased future operating income
B) future tax deduction
C) increased cost of plant asset
D) decreased cost of plant asset
Using the total project approach to investment decisions, the following information is
available:
Net present value of Alternative A is $12,000
Net present value of Alternative B is $14,000
If the differential approach is used to evaluate Alternatives A and B, what is the
numerical result obtained?
A) $0
B) $2,000 advantage to Alternative B
C) $12,000
D) $14,000
Which of the following statements is FALSE?
A) The expected variable overhead costs per unit used in the flexible budget are equal
to the variable overhead costs per unit used in product costing.
B) If the actual volume of production equals the expected volume of production, the
variable overhead costs per unit are the same for product costing and budgeting.
C) If the actual volume of production exceeds the expected volume of production, the
variable overhead costs per unit are different for product costing and budgeting.
D) If the actual volume of production exceeds the expected volume of production, the
variable overhead costs per unit are the same for product costing and budgeting.
The management accountant prepares the following performance report for a company’s
first year of operations:
Budget Actual Variance
Sales $100,000 $110,000 ?
Cost of Goods Sold 50,000 45,000 ?
Selling Expenses 20,000 19,000 ?
Administrative Expenses 10,000 11,000 ?
Operating Income $20,000 $35,000 ?
Required:
A) Compute variances for each line item on the income statement. Also indicate if the
variances are favorable or unfavorable.
Butters Company pays wages of $400 per day. The work week begins on Monday and
ends on Friday. Wages are paid weekly on Friday. The current month ends on a
Wednesday. The adjusting entry at the end of the month will ________.
A) increase liabilities by $400
B) increase liabilities by $800
C) increase liabilities by $1,200
D) increase liabilities by $2,000
In net present value analysis, a reduction in a future cash outflow is treated as
________.
A) an irrelevant cash flow
B) a cash inflow
C) a disposal value of a long-term asset
D) an expense
In process costing, the journal entry to record factory overhead applied to units in a
department would include a ________.
A) Debit to Factory Overhead
B) Debit to Work-in-Process Inventory—Department Name
C) Credit to Cost of Goods Sold
D) Credit to Finished Goods Inventory
The best way to reconcile any conflict between capital budgeting models and
performance evaluation is to use the ________ for both capital budgeting decisions and
performance evaluation.
A) payback period model
B) accounting rate of return model
C) real options model
D) discounted cash flow model
The Troy Company has the following information available:
Total fixed costs $400,000
Expected sales (units) 100,000
Contribution margin per unit $7.50
Tax rate 30%
What is the after-tax net income?
A) $245,000
B) $280,000
C) $350,000
D) $400,000
On April 1, 2012, Company Z lends $200,000 to Company Y on a 8% note. For the six
months ending June 30, 2012, what amount of interest revenue will Company Z report
on this note?
A) $4,000
B) $8,000
C) $12,000
D) $16,000
Zebron Company is considering the following investment:
Initial capital investment $200,000
Estimated useful life 3 years
Estimated disposal value in 3 years $1,000
Estimated annual savings in cash operating costs(end of year) $100,000
Minimum desired rate of return 10%
Present value of ordinary annuity of one, 3 periods at 10% 2.4869
Present value of one, 3 periods at 10% 0.7513
Assume straight-line depreciation is used. Ignore income taxes. The net present value of
the investment is ________.
A) $48,690
B) $49,441
C) $49,690
D) $101,000
Vanessa Company purchased common stock in Gilmore Company. During the current
year, Gilmore Company earned $4,000,000 and paid dividends of $1,000,000. Assume
that Vanessa Company owns 40 percent of the outstanding shares of Gilmore Company.
Gilmore Company’s net income will affect Vanessa Company by ________.
A) increasing investments by $1,600,000
B) increasing investments and cash by $2,000,000
C) increasing cash and stockholders’ equity by $400,000
D) increasing cash and decreasing investments by $1,600,000
