The controller’s staff consists of management accountants responsible for systems and
procedures, general accounting, budgets, taxes, and cost accounting.
a. True
b. False
Answer:
The Darwin Company reports the following information:
Period costs are a. $24,500
b. $30,300
c. $29,200
d. $35,000
Answer:
The following are all product costs except
a. direct materials
b. sales and administrative expenses
c. direct labor
d. factory overhead
Answer:
The number of days’ sales in receivables is one means of expressing the relationship
between average daily sales and accounts receivable.
a. True
b. False
Answer:
The production department is proposing the purchase of an automatic insertion
machine. It has identified 3 machines and have asked the accountant to analyze them to
determine which of the proposals (if any) meet or exceed the company’s policy of a
minimum desired rate of return of 10% using the net present value method. Each of the
assets has an estimated useful life of 10 years. The accountant has identified the
following data:
Which of the investments are acceptable?
a. Machines A & C
b. Machines B & C
c. Machine B only
d. Machine A only
Answer:
Jarrett Company is considering a cash outlay of $300,000 for the purchase of land,
which it could lease out for $36,000 per year. If alternative investments are available
that yield a 9% return, the opportunity cost of the purchase of the land is
a. $27,000
b. $36,000
c. $9,000
d. $72,000
Answer:
If sales totaled $800,000 for the year (80,000 units at $10.00 each) and the planned
sales totaled $799,500 (78,000 units at $10.25 each), the effect of the unit price factor
on the change in sales is:
a. $19,500 decrease
b. $19,500 increase
c. $20,000 decrease
d. $20,000 increase
Answer:
Which of the following expenses incurred by the sporting goods department of a
department store is a direct expense?
a. depreciation expense’”office equipment
b. insurance on inventory of sporting goods
c. uncollectible accounts expense
d. office salaries
Answer:
Which of the following is an example of a nonfinancial measure?
a. lead time
b. setup time
c. units scrapped
d. all of the above
Answer:
When estimated costs are used in applying the cost-plus approach to product pricing,
the estimates should be based upon ideal levels of performance.
a. True
b. False
Answer:
The balanced scorecard measures
a. only financial information
b. only nonfinancial information
c. both financial and nonfinancial information
d. external and internal information
Answer:
In a lean system, direct labor is included in conversion costs.
a. True
b. False
Answer:
The Valhalla Company manufactures small lamps and desk lamps. The following shows
the activities per product:
Using the following information prepared by the Valhalla Company, determine (a) the
activity rates for each activity and (b) the activity-based factory overhead per unit for
each product.
Answer:
Flying Cloud Co. has the following operating data for its manufacturing operations:
The company has decided to increase the wages of hourly workers which will increase
the unit variable cost by 10%. Increases in the salaries of factory supervisors and
property taxes for the factory will increase fixed costs by 4%. If sales prices are held
constant, the next break-even point for Flying Cloud Co. will be
a. increased by 640 units
b. increased by 400 units
c. decreased by 640 units
d. increased by 800 units
Answer:
Schedule of Activity Costs
From the above schedule, calculate the (a) prevention and (b) appraisal costs.
Answer:
A loss due to a discontinued operation should be reported on the income statement
a. above income from continuing operations
b. without related tax effect
c. below income from continuing operations
d. as an operating expense
Answer:
The manager of the furniture department of a leading retailer does not control the
salaries of departmental personnel.
a. True
b. False
Answer:
Bugaboo Co. manufactures three types of cookies: Fluffs, Crinkles, and Snaps. The
production process is relatively simple, and factory overhead costs are allocated to
products using a single plantwide factory rate based on direct labor hours. Information
for the month of May, Bugaboo’s first month of operations, follows:
Bugaboo has budgeted direct labor costs for May at $8.50 per hour. Budgeted direct
materials costs for May are: Fluffs, $0.75/unit; Crinkles $0.40/unit; and Snaps
$0.30/unit.
Bugaboo’s budgeted overhead costs for May are:
Assume that Bugaboo sells all the boxes it produces in May.
(a) Compute Bugaboo’s plantwide factory overhead rate for May.
(b) Compute the product cost in May for each type of cookie.
(c) Does Bugaboo’s use of a plantwide factory overhead rate in any way distort the
product costs for May?
Answer:
Unit variable cost does not change as the number of units of activity changes.
a. True
b. False
Answer:
The desired selling price for a product will be the same under both variable and total
cost.
a. True
b. False
Answer:
The production department is proposing the purchase of an automatic insertion
machine. It has identified 3 machines, each with an estimated life of 10 years. Which
machine offers the best internal rate of return?
a. Machine B only
b. Machine C only
c. Machines A and B
d. Machine A only
Answer:
A budget procedure that provides for the maintenance at all times of a twelve-month
projection into the future is called continuous budgeting.
a. True
b. False
Answer: