Which of the following statements is true about the values statement of an
organization?
A. It is used to formulate the mission statement.
B. It reflects the organization’s culture by identifying beliefs about what is important to
the organization.
C. It focuses on long-range plans for the organization.
D. The values contained in the statement must be quantifiable.
Overapplied overhead would result if
A. the plant were operated at less than normal capacity.
B. overhead costs incurred were less than costs charged to production.
C. overhead costs incurred were unreasonably large in relation to units produced.
D. overhead costs incurred were greater than costs charged to production.
Which of the following defines variable cost behavior?
A. remains constant remains constant
B. remains constant increases
C. increases increases
D. increases remains constant
If a project generates a net present value of zero, the profitability index for the project
will
A. equal zero.
B. equal 1.
C. equal -1.
D. be undefined.
Given the following information for Gregg Corporation, prepare the necessary journal
entries, assuming that the Raw Material Inventory account contains both direct and
indirect material.
a. Purchased raw material on account $45,500.
b. Put material into production: $28,000 of direct material and $5,000 of indirect
material.
c. Accrued payroll of $95,000, of which 65 percent was direct and the remainder was
indirect.
d. Incurred and paid other overhead items of $42,000.
e. Transferred items costing $92,500 to finished goods.
f. Sold goods costing $79,900 on account for $134,200.
Why is variable costing not in accordance with generally accepted accounting
principles?
A. Fixed manufacturing costs are treated as period costs under variable costing.
B. Variable costing procedures are not well known in industry.
C. Net earnings are always overstated when using variable costing procedures.
D. Variable costing ignores the concept of lower of cost or market when valuing
inventory.
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
Whitney Corporation
Whitney Corporation, a reseller of women’s fashions, has budgeted its activity for
March. The budget information is presented below:
Refer to Whitney Corporation. The budgeted net income for March is:
A. $107,500
B. $137,500
C. $ 42,500
D. $ 77,500
The actual time it takes to perform a specific task is called
A. inspection time.
B. service time.
C. transfer time.
D. quality time.
Atlantic Princess Corporation
Atlantic Princess Corporation is considering the purchase of a new ocean-going vessel
that could potentially reduce labor costs of its operation by a considerable margin. The
new ship would cost $500,000 and would be fully depreciated by the straight-line
method over 10 years. At the end of 10 years, the ship will have no value and will be
scuttled. Atlantic Princess’s cost of capital is 12 percent, and its marginal tax rate is 40
percent.
Refer to Atlantic Princess Corporation. What is the present value of the depreciation tax
benefit of the new ship? (Round to the nearest dollar.) Present value tables or a financial
calculator are required.
A. $113,004
B. $282,510
C. $169,506
D. $200,000
Vidal Corporation produces a single product. The following is a cost structure applied
to its first year of operations.
During the first year, Vidal Corporation manufactured 5,000 units and sold 3,800. There
was no beginning or ending work-in-process inventory.
a. How much income before income taxes would be reported if Vidal Corporation uses
absorption costing?
b. How much income before income taxes would be reported if variable costing was
used?
c. Show why the two costing methods give different income amounts.
