1) When a company is a price-setter, it emphasizes a target costing approach to pricing.
2) It is possible to have a situation where the direct materials price variance is favorable
and the direct materials quantity variance is unfavorable.
3) One key element of lean production is to produce large batches.
4) Financing activities include activities that affect long-term liabilities and owner’s
equity on the balance sheet.
5) The amount of overallocation or underallocation is found by taking the difference
between the amount of overhead allocated during the year and the amount of overhead
estimated for the year.
6) Direct labor standards are becoming less relevant to many companies due to the shift
towards automated production processes.
7) The ultimate purpose of the balanced scorecard is to give management a balanced
view of the company’s performance.
8) Companies often refine their cost allocation systems to minimize the amount of cost
distortion caused by the simpler cost allocation systems.
9) The journal entry to record the use of direct labor in Processing Department #1
would include a credit to WIP-Processing Department #1 .
10) Allocating manufacturing overhead to jobs simply means ‘splitting up” the total
manufacturing overhead costs among the jobs produced during the year.
11) Companies operating in highly competitive industries are generally price-setters.
12) Merchandising companies prepare sales, cash, and operating expense budgets.
13) Lubrizol is a chemical company that specializes in producing lubricants. Lubrizol
was acquired in 2011 for $9 billion by investment holding company Berkshire
Hathaway. Lubrizol is likely to be classified as a(n)
A) cost center
B) investment center
C) profit center
D) revenue center
14) Pink Ribbon Shoppe, a clothing retailer, had the following total costs as grouped by
value chain element:
What were the company’s inventoriable costs?
A) $142,000
B) $17,000
C) $72,000
D) $89,000
15) Using account analysis, what type of cost are utilities if you are charged $45 for the
first 400 kilowatt hours, $100 for 401-600 kilowatt hours, and $165 + or – for 601-900
kilowatt hours?
A) Fixed
B) Mixed
C) Variable
D) Step
16) James Industries uses departmental overhead rates to allocate its manufacturing
overhead to jobs. The company has two departments: Assembly and Sanding. The
Assembly Department uses a departmental overhead rate of $35 per machine hour,
while the Sanding Department uses a departmental overhead rate of $20 per direct labor
hour. Job 603 used the following direct labor hours and machine hours in the two
departments:
The cost for direct labor is $30 per direct labor hour and the cost of the direct materials
used by Job 542 is $1,400.
What was the total cost of Job 542 if James Industries used the departmental overhead
rates to allocate manufacturing overhead?
A) $1,850
B) $2,170
C) $2,240
D) $1,790
17) Jolly Company produces hula hoops. Jolly Company has the following sales
projections for the upcoming year:
Jolly Company wants to have 25% of the next quarter’s sales in units on hand at the end
of each quarter. Inventory at the beginning of the year was 5,525 hula hoops. How
many hula hoops should Jolly Company produce during the first quarter?
A) 34,625
B) 23,575
C) 16,575
D) 22,100
18) The McCumber Corporation data for the current year:
With respect to net income before income tax expense and net income, what would a
horizontal analysis report?
A) There was an increase in both net income before income tax expense and net income
of 15.00%
B) Both net income before income tax expense and net income increased by $129,000
C) The current ratio is 0.92
D) Both net income before tax expense and net income were 11.17% of net sales
revenue
19) Using account analysis, what type of cost is the fee the airline company charges for
your bags? A typical policy is $25 if the bag weighs between 0 and 50 lbs; $75 if the
bag weighs between 50 and 75 lbs and $125 if the bag weighs between 75 and 100 lbs.
A) Fixed
B) Mixed
C) Step
D) Variable
20) Period costs are
A) always recorded as an expense
B) always considered part of the inventory
C) expensed only when the inventory is sold
D) none of the above
21) LaComedia Dinner Theater sells tickets for dinner and a show for $40 each. The
cost of providing dinner is $26 per ticket and the fixed cost of operating the theater is
$100,000 per month. The company can accommodate 12,000 patrons each month. What
is the contribution margin per patron?
A) $2.86
B) $14.00
C) $0.35
D) $26.00
22) Which one of the following items is not one of the three primary manager
responsibilities?
A) Controlling
B) Planning
C) Feedback
D) Adjusting
23) A company’s margin of safety can be stated
A) in units
B) in dollars
C) as a percentage of sales
D) any of the above
24) Ryan’s Paints allocates overhead based on machine hours. Selected data for the
most recent year follow.
The estimates were made as of the beginning of the year, while the actual results were
for the entire year.
The predetermined manufacturing overhead rate per machine hour is closest to
A) $10.44
B) $11.75
C) $10.84
D) $12.20
25) Federer Company is debating the use of direct labor cost or direct labor hours as the
cost allocation base for allocating manufacturing overhead. The following information
is available for the most recent year:
If Federer Company uses direct labor cost as the allocation base, what would the
allocated manufacturing overhead be for the year?
A) $701,509
B) $325,500
C) $395,250
D) $425,000
26) Before these materials are used to manufacture cabinets, a woodworker classifies
lumber, paint, and glue as
A) finished goods inventory
B) work in process inventory
C) raw materials inventory
D) merchandise inventory
27) Expected purchases for June and July are $80,000 and $92,000, respectively.
Purchases for May were $60,000. All purchases are paid 45% in the month of purchase
and 55% the following month. At what amount are June payments for purchases
budgeted?
A) $69,000
B) $71,000
C) $86,600
D) $110,400
28) What is the name of the professional association for managerial accountants?
A) Institute of Professional Accountants
B) Professional Accountants Association
C) Association of Management Accountants
D) Institute of Management Accountants
29) Gomez Corporation is considering two alternative investment proposals with the
following data:
How long is the payback period for Proposal X?
A) 10.90 years
B) 6.00 years
C) 6.80 years
D) 21.25 years
30) The manager of the truck maintenance department at FedEx would be in charge of
a(n)
A) cost center
B) investment center
C) profit center
D) revenue center
31) Southern Instruments makes calculators for business applications. The budgeted
selling price is $120 per calculator, the variable rate is $98 per calculator and budgeted
fixed costs are $150,000 per month. What is the budgeted operating income for 15,000
calculators sold in a month?
A) $330,000
B) $1,620,000
C) $1,800,000
D) $180,000
32) Which of the following is a disadvantage of decentralization?
A) Unit managers may not understand the big picture of the company
B) Management does not have time to concentrate on long-term strategic planning
C) Unit managers have decreased motivation and retention
D) Managers receive training and experience to allow advancement in the organization
33) The ________ is a subgroup of the Board of Directors.
A) managerial committee
B) stockholders’ committee
C) audit committee
D) financial committee
34) Which of the following types of companies use a “cost of goods sold, inventory, and
purchases” budget?
A) Merchandising
B) Manufacturing
C) Service
D) All of the above
35) Brittany Furniture manufactures two products: Futons and Recliners. The following
data are available:
The company can manufacture two futons per machine hour and one recliner per
machine hour. The company’s production capacity is 900 machine hours per month.
What is the contribution margin ratio for futons?
A) 53.85%
B) 37.50%
C) 165.00%
D) 35.00%
36) The following information is provided by Arrow Company:
The units in ending WIP inventory were 80% complete for materials and 40% complete
for conversion costs.
At the end of the year, what are the equivalent units for conversion costs?
A) 5,200
B) 1,200
C) 4,000
D) 2,800
37) Hummingbird Manufacturing manufactures small parts and uses an activity-based
costing system.
The following parts were produced in October with the following information:
Total unit cost for part B is closest to (rounded to two decimal places)
A) $4.71
B) $4.64
C) $7.63
D) $3.09
38) What will the use of departmental overhead rates generally result in?
A) The use of a separate cost allocation base for each department in the factory
B) The use of a single cost allocation base
C) The use of a single overhead cost pool for the factory
D) The use of separate cost allocation base for each activity in the factory
39) Brigg’s Breakfast Appliances manufactures two products: Waffle Makers and
Coffee Makers. The following data are available:
The company can manufacture two waffle makers per machine hour and three coffee
makers per machine hour. The company’s production capacity is 1,200 machine hours
per month.
What is the contribution margin per machine hour for waffle makers?
A) $75
B) $225
C) $150
D) $330
40) The value chain is used by
A) service, manufacturing and merchandising businesses
B) only service and manufacturing businesses
C) only service and merchandising businesses
D) only manufacturing and merchandising businesses
41) The final step in the preparation of the financial budget is the preparation of which
of the following?
A) Master budget
B) Cash budget
C) Operating budgets
D) Budgeted balance sheet
42) An organization faces many challenges when implementing an environmental
accounting (EMA) system. Which of the following inherent challenges must an
organization overcome because its technical staff and accounting staff are in two
separate locations, using two separate information systems?
A) Hidden Cost
B) Communication issue
C) Newness of EMA
D) Historical orientation of accounting
43) Which of the following would be an example of a typical manufacturing overhead
cost?
A) Direct materials
B) Sales revenue
C) Direct labor
D) Depreciation on factory equipment