1) Actual manufacturing overhead costs are accumulated as debits to a single general
ledger account called manufacturing overhead.
2) Job costing is not commonly used by service firms (such as law firms) or trades
people (such as auto mechanics).
3) The IMA is the professional association for managerial accountants.
4) Outliers are data points that fall in the same general pattern as the other data points.
5) An expense such as advertising could be considered a discretionary fixed cost.
6) Variable costs per unit decrease as production volume increases.
7) Just because a behavior is legal does not always mean it is ethical.
8) An R-square value over .80 generally indicates that the cost equation is not very
reliable for predicting costs at other volumes within the relevant range.
9) The most significant cost for a service firm is direct labor cost.
10) The financial budgets prepared for manufacturers are different than those for
merchandising and service companies.
11) Only manufacturing companies have finished goods inventory.
12) To determine the amount of overhead allocated, the overhead rate is divided by the
cost driver.
13) Most financial statement analysis covers trends of more than one year.
14) The capital turnover is operating income divided by sales.
15) Evaluating operations by comparing actual results to budgeted results is a part of
the controlling responsibility of management.
16) A product’s contribution margin per unit is the excess of the selling price per unit
over the variable cost of obtaining and selling each unit.
17) A company that sells one product would be more likely to calculate breakeven in
terms of sales units, rather than sales revenue.
18) The purpose of managerial accounting is to gather, summarize, and report the cost
and revenue data relevant to each decision that is made.
19) Blossom Company has two sequential processing departments: Assembly then
Shaping. The Shaping Department reports the following information. Conversion costs
are applied evenly throughout the process.
What would have been the journal entry to record the transfer of product from the
assembly department to the shaping department?
A) WIPassembly (Dr); WIPshaping (Cr) 645,000
B) WIPshaping (Dr); WIPassembly (Cr)728,000
C) WIPassembly (Dr); WIPshaping (Cr)728,000
D) WIPshaping (Dr); WIPassembly (Cr)645,000
20) It costs Homer’s Manufacturing $0.75 to produce baseballs and Homer sells them
for $4.00 a piece. Homer pays a sales commission of 5% of sales revenue to his sales
staff. Homer also pays $12,000 a month rent for his factory and store, and also pays
$75,000 a month to his staff in addition to the commissions. Homer sold 67,500
baseballs in June. If Homer prepares a traditional income statement for the month of
June, what would be his gross profit?
A) $320,625
B) $219,375
C) $270,000
D) $50,625
21) Swiss Furniture Company manufactures bookshelves and uses an activity-based
costing system to allocate all manufacturing conversion costs. The following
information is provided for the month of May:
Each bookshelf consists of 4 parts. The direct materials cost per bookshelf is $30.00.
What is the total manufacturing cost per bookshelf?
A) $24.80
B) $22.00
C) $54.80
D) $52.00
22) Which of the following is not an example of an indirect cost incurred in
manufacturing automobiles?
A) Plant supervisor salary
B) Machinery depreciation in the factory
C) Plant utilities
D) Cost of the automobile engines
23) The following data relate to Austin Corporation for last year:
What is the net cash provided by operating activities for last year on the statement of
cash flows for Austin Corporation?
A) $165,000
B) $123,000
C) $169,000
D) $137,000
24) In preparing the operating budget, the first step is preparing the
A) cash budget
B) sales budget
C) budgeted income statement
D) purchases budget
25) The Bedford Corporation reported the following income statement and balance
sheet amounts and additional information for the end of the current year.
Inventory and prepaid expenses account for $30,000 of the current year’s current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the dividend yield for the current year?
A) 59.29%
B) 54.06%
C) 37.49%
D) 2.43%
26) The HF Corporation manufactures and sells toy gyroscopes. The following data is
related to sales and production of the toy gyroscopes for last year.
Using absorption costing, what is gross profit for last month?
A) $903,000
B) $1,497,000
C) $1,200,000
D) $3,703,000
27) Twinkle Ornaments Company uses job costing. Twinkle Ornaments Company has
two departments, Trimming and Finishing. Manufacturing overhead is allocated based
on direct labor cost in the Trimming Department and direct labor hours in the Finishing
Department. The following additional information is available:
Actual data for completed Job No. 650 is as follows:
If Job No. 650 consists of 500 units of product, the average unit cost of this job is
closest to:
A) $426.64
B) $163.50
C) $458.50
D) $295.00
28) The manager of the Walt Disney World Studios (a corporate division) would be in
charge of a(n)
A) investment center
B) cost center
C) profit center
D) revenue center
29) Assuming an interest rate of 6%, the present value of $18,000 received at the end of
each year for 6 years would be closest to
A) $88,506
B) $11,970
C) $108,000
D) $125,550
30) When is the adjusting of cost of goods sold for the underallocation or overallocation
of manufacturing overhead generally done?
A) At the end of the period
B) During the period
C) Before the period starts
D) Never
31) Rogers Incorporated has a targeted operating income of $518,000 for the upcoming
year. The selling price of its single product is $40.50 each, while the variable cost per
unit is $12.50. Fixed costs total $182,000.
Calculate the following:
a.Contribution margin per unit
b.Breakeven point in units
c.Units to be sold to earn the targeted operating income
32) The cost of inspection at various stages of production is an example of a(n)
A) prevention cost
B) appraisal cost
C) internal failure cost
D) external failure cost
33) Baxter Company produces frisbees using a three-step sequential process that
includes molding, coloring and finishing. At what stage would the sets be allocated
manufacturing overhead?
A) When the frisbees are in WIP inventory-molding
B) When the frisbees are in WIP inventory-finishing
C) When the frisbees are in WIP inventory-coloring
D) All of the above
34) Sea Side Enterprises is trying to predict the cost associated with producing its
anchors. At a production level of 5,000 anchors, Sea Side Enterprises average cost per
anchor is $52.00. If $15,000 of the costs are fixed, and the plant manager uses the
average cost per unit to predict total costs, her forecast for 6,000 anchors will be
A) $260,000
B) $312,000
C) $309,000
D) $52,000
35) Total contribution margin less total fixed expenses equals
A) contribution margin ratio
B) operating income
C) gross profit
D) sales revenue
36) Which of the following is a characteristic of a capital asset?
A) The item will be used for a long period of time
B) The item involves a significant sum of money
C) None of these characteristics are correct
D) Both A and B are correct
37) The cost of monitoring pollutants in the wastewater discharged from a
manufacturing plant would be categorized as what type of cost by an environmental
management accounting system (EMA)?
A) Prevention cost
B) Waste and emission control cost
C) Intangible cost
D) Research and development cost
38) Which of the following organizations has developed a Connected Reporting
Framework (CRF) to be used to provide information for internal and external use?
A) Accounting for Sustainability (A4S) Project
B) International Accounting Standards Board (IASB)
C) Carbon Disclosure Project (CDP)
D) International Organization for Standardization (ISO)
39) Neeley Grocery has a monthly target operating income of $25,000. Variable
expenses are 20% of sales and monthly fixed expenses are $15,000. What is Neeley
Grocery’s operating leverage factor at the target level of operating income?
A) 0.63
B) 2.67
C) 0.40
D) 1.60
40) If the selling price per unit is $10, the unit contribution margin is $5, and total fixed
expenses are $15,000, what are the breakeven sales in units?
A) 75,000
B) 150,000
C) 1,500
D) 3,000
41) The Settler’s Chuck Wagon sells tickets for dinner and a show for $50 each. The
cost of providing dinner is $23 per ticket and the fixed cost of operating the theater is
$115,000 per month. The company can accommodate 13,500 patrons each month. What
is the projected monthly income if 5,500 patrons visit the theater each month?
A) $263,500
B) $148,500
C) $249,500
D) $33,500
42) Cave Hardware’s forecasted sales for April, May, June, and July are $200,000,
$230,000, $190,000, and $240,000, respectively. Sales are 65% cash and 35% credit
with all accounts receivables collected in the month following the sale. Cost of goods
sold is 75% of sales and ending inventory is maintained at $60,000 plus 10% of the
following month’s cost of goods sold. All inventory purchases are paid 22% in the
month of purchase and 78% in the following month.
What are the cash collections budgeted for June?
A) $150,500
B) $193,500
C) $123,500
D) $204,000
43) Which person or group is not an employee of the corporation?
A) A member of the audit committee
B) The treasurer
C) The VP of manufacturing
D) The CFO
44) Fit Apparel Company reports the following data for its first year of operation.
What are the total manufacturing costs?
A) $650,000
B) $835,000
C) $740,000
D) $675,000
45) The costing system used by an oil refinery would be
A) process costing
B) job costing
C) equivalent units costing
D) conversion cost costing
46) On a production cost report, the following cost(s) would appear
A) beginning work in process
B) costs added during the period
C) total operating costs during the period
D) Both A and B are included on a production cost report
47) The Porch Cushion Company manufactures foam cushions. The number of cushions
to be produced in the upcoming three months follows:
Each cushion requires 2 pounds of the foam used as stuffing. The company has a policy
that the ending inventory of foam each month must be equal to 25% of the following
month’s expected production needs. How many pounds of foam does The Porch
Cushion Company need to purchase in August?
A) 27,500
B) 20,000
C) 22,500
D) 42,500
48) Country Furniture Company manufactures furniture at its Akron, Ohio, factory.
Some of its costs from the past year include:
Product costs for Country Furniture Company totaled
A) $510,500
B) $486,500
C) $370,000
D) $526,500
49) The Cosmo Corporation manufactures and assembles office chairs. Cosmo uses an
activity-based costing system to allocate all manufacturing conversion costs. Each chair
consists of 15 separate parts totaling $125 in direct materials, and requires 2.0 hours of
machine time to produce. Additional information follows:
What is the cost of machining per chair?
A) $4.00
B) $30.00
C) $15.50
D) $5.50
50) Planning involves which of the following activities?
A) Evaluating the results of operations
B) Overseeing the company’s day-to-day operations
C) Setting goals and objectives for the company
D) None of the above
51) Peterson Company gathered the following information for the year ended December
31:
What would the predetermined manufacturing overhead rate for the year be using direct
labor cost as the allocation base?
A) 130% of direct labor cost
B) 90% of direct labor cost
C) 111% of direct labor cost
D) 100% of direct labor cost
52) Back Porch Company manufactures lawn chairs using an activity-based costing
system to allocate all manufacturing conversion costs. The following information is
provided for the month of June:
Each lawn chair consists of 8 parts; the total direct materials cost per lawn chair is
$10.00.
What is the total manufacturing cost per lawn chair?
A) $32.20
B) $19.20
C) $22.20
D) $29.20
53) Total fixed costs for Randolph Manufacturing are $754,000. Total costs, including
both fixed and variable, are $1,000,000 if 150,000 units are produced. The variable cost
per unit is
A) $6.67/unit
B) $5.03/unit
C) $11.69/unit
D) $1.64/unit
54) The ________ capital budgeting method uses accrual accounting, rather than net
cash flows, as a basis for calculations.
A) ARR
B) Payback
C) NPV
D) IRR
55) Moe’s Pizza Shop sells a large pizza for $11.50. Unit variable expenses total $5.50 .
The breakeven sales in units is 5,000 and budgeted sales in units is 9,500 . What is the
margin of safety in dollars?
A) $51,750
B) $391
C) $166,750
D) $4,500
56) Which of the following items represents monetary information in an environmental
management accounting system?
A) Kilowatt hours of electricity used
B) Cost of upgrading factory equipment to reduce emissions
C) Ratio of recycled trash to total trash
D) Cost of janitorial services in office
57) Showboat Corporation had actual manufacturing overhead costs for the most recent
year of $29,500. Manufacturing overhead is allocated using a predetermined
manufacturing overhead rate of $1.50 per direct labor hour. Direct labor cost is $19 per
hour. At the end of the year, Cabaret Corporation found it had overallocated
manufacturing overhead by $1,250. How many direct labor hours were worked in total
during the year?
A) 20,500
B) 18,833
C) 19,667
D) 833
58) Stockholders’ expectations of company profits are affected by which of the
following?
A) Industry risk
B) Historical company earnings
C) General economic conditions
D) All of the above