To apply the budgeted overhead costs to a job, the budgeted overhead rate is multiplied
by the ________.
A) actual production in units
B) expected production in units
C) actual amount of cost driver used by the job
D) expected amount of cost driver used by the job
In a corporate setting, property taxes are an example of a(n) ________.
A) mixed cost
B) committed fixed cost
C) discretionary fixed cost
D) engineering cost
An investor holds 5% of the outstanding stock of an investee. The investor plans to sell
the stock in two months. The investor reports the dividends received from the stock as
________.
A) an increase in the investment account
B) a decrease in the investment account
C) dividend revenue on the income statement
D) equity in earnings of the investee on the income statement
Costs that change abruptly at different levels of activity because the resources are
available only in indivisible chunks are called ________.
A) mixed costs
B) variable costs
C) fixed costs
D) step costs
A capital investment has a net present value of $1,000.00 at a required rate of return of
10%. At a 12% required rate of return, the net present value of the investment is
$100.00. At a 14% required rate of return, the net present value of the investment is $0.
The capital investment should be rejected if ________.
A) the required rate of return exceeds 14%
B) the required rate of return exceeds 12%
C) the required rate of return is less than 14%
D) the required rate of return is less than 12%
How is accounting information prepared by management accountants used within an
organization?
A) to help operating managers make decisions
B) to plan an organization’s operations
C) to control an organization’s operations
D) all of the above
Brankov Company purchased common stock in Ramona Company for $400,000. In the
current year, Ramona Company reported net income of $50,000 and paid a dividend of
$32,000. At the end of the year, the market value of the investment in Ramona
Company was $410,000.
Required:
A) Assume Brankov Company owns 10% of the shares of Ramona Company. Brankov
Company considers the investment to be available-for-sale securities. Show the effects
of the transactions above on the accounts of Brankov Company using the balance sheet
equation.
B) Assume Brankov Company owns 25% of the shares of Ramona Company. Show the
effects of the transactions above on the accounts of Brankov Company using the
balance sheet equation.
Which of the following is NOT a prevention activity for quality control?
A) improvements in production processes
B) engineering analyses to improve product design for better manufacturing
C) inspection of incoming materials
D) quality training of employees
If a department identifies more than one cost driver for overhead costs, the department
ideally should ________.
A) put 80 percent of the costs into one pool and 20 percent into a second pool
B) select a single cost driver
C) allocate 80 percent of the costs with 20 percent of the cost drivers
D) create as many cost pools as there are cost drivers
In periods of inflation, the ________ method of inventory valuation provides a more
realistic net income.
A) LIFO
B) FIFO
C) average cost
D) weighted-average cost
The excess of applied overhead costs over the actual overhead costs is called ________.
A) overapplied overhead
B) underapplied overhead
C) underbudgeted overhead
D) overestimated overhead
Gonzalez Company reports the following information:
Net operating income after taxes $200,000
Before-tax operating income $300,000
Average invested capital $500,000
After-tax cost of capital 10%
What is the residual income for Gonzalez Company?
A) $30,000
B) $50,000
C) $150,000
D) $250,000
The following information was obtained from the accounting records of Stevenson
Incorporated:
Direct materials purchased $80,000
Direct materials used $54,000
Direct manufacturing labor costs $12,000
Indirect manufacturing labor costs $11,000
Selling expenses $16,000
Administrative expenses $22,000
Factory utilities costs $20,000
Rental cost of factory machines $50,000
Work in process inventory, beginning 0
Work in process inventory, end 0
Finished goods inventory, beginning $10,000
Finished goods inventory, end $30,000
What is Cost of Goods Sold?
A) $57,000
B) $77,000
C) $127,000
D) $147,000
The total of all production costs plus the total of all ________ costs equals the full cost
of a product.
A) selling
B) distribution
C) distribution and marketing
D) selling and administrative
Simmons Company has the following information available for variable overhead costs.
Direct labor hours are the cost driver for variable overhead costs.
Actual variable overhead costs $4,700
Standard variable overhead costs $1.20 per hour
Actual direct labor hours 3,750 hours
Standard direct labor hours per unit 5 hours
Units produced 700
What is the variable overhead spending variance?
A) $200 Favorable
B) $200 Unfavorable
C) $500 Favorable
D) $500 Unfavorable
Bryant Company has obtained the following data about a possible planned investment:
Cost $270,000
Terminal salvage value in 8 years $10,000
Annual cash operating savings for 8 years (end of year) $50,000
Estimated useful life in years 8
Minimum desired rate of return 10%
Present value of ordinary annuity of one, 10%, 8 periods 5.3349
Present value of one, 10%, 8 periods 0.4665
The company uses straight-line depreciation method for financial reporting. Ignore
income taxes. The cash operating savings of $50,000 do not include depreciation
expense.
Required:
A) Compute the net present value of the investment.
B) Compute the payback period.
C) Compute the accounting rate of return using the initial required investment.
Which of the following statements regarding process costing is TRUE?
A) Process-costing systems use a single Work-In-Process Inventory account.
B) Process costing is used for products that are easily separated and individually
identifiable.
C) The unit cost for process costing is found by accumulating the costs for all the
manufacturing departments and dividing the total by the number of units produced.
D) The process-costing approach does not distinguish between individual units of
product.
Which of the following statements about budgets and budgeting is FALSE?
A) Budgets help coordinate financial and operational activities.
B) The vast majority of managers use budgeting as an effective cost management tool.
C) Budgeting is the process of formulating an organization’s plans.
D) Managers do not use budgets for performance evaluation.
The Technical Services Department of Georgia State University leased a photocopy
machine for $1,500 per month plus $0.04 per copy. Additional budgeted variable
operating costs were $0.02 per copy. The Technical Services Department estimated the
machine would produce 30,000 copies per month. The Accounting Department
estimated it would make 6,000 copies per month but it actually made 5,000 copies.
Assume fixed and variable cost pools are allocated separately. What is the amount of
variable cost allocated to the Accounting Department for the month?
A) $200
B) $240
C) $300
D) $360
The following information is available for Ward Company:
Sales $189,400
Gross profit $56,400
Net income $25,800
Total current assets $32,400
Total current liabilities $34,400
Total stockholders’ equity, last year $192,000
Total stockholders’ equity, current year $280,000
Required:
Compute the following ratios:
A) Current ratio
B) Gross profit rate
C) Return on sales
D) Return on stockholders’ equity
Sue Company is considering the production of a new product. Sue Company has the
following data available:
Expected product life 4 years
Expected sales (units) over product life 2,000
Variable production costs $42 per unit
Variable selling costs $16 per unit
Annual fixed production costs $15,000
Annual fixed selling costs $5,000
Research and development costs $184,000
Selling price $200 per unit
What is the expected profit or (loss) of the product over the product life cycle?
A) $(40,000)
B) $20,000
C) $204,000
D) $880,000
In engineering analysis, cost analysts estimate cost functions using ________.
A) past experience and experiments with prototypes
B) accounting and industrial engineering literature
C) advice of management consultants
D) all of the above
Beckham Company has the following information available:
Selling price per unit $100
Variable cost per unit $55
Fixed costs per year $400,000
Expected sales per year 20,000 units
What is the expected operating income for a year?
A) $480,000
B) $500,000
C) $680,000
D) $700,000
If a department identifies more than one cost driver for overhead costs, the department
ideally should ________.
A) put 80 percent of the costs into one pool and 20 percent into a second pool
B) select a single cost driver
C) allocate 80 percent of the costs with 20 percent of the cost drivers
D) create as many cost pools as there are cost drivers
The net present value method computes the present value of all ________ using a
minimum desired rate of return.
A) expected future cash inflows only
B) expected future cash outflows only
C) expected future cash inflows and expected future cash outflows
D) past cash inflows
When estimating the cost of the laundry department in a hospital, which of the
following cost drivers should be used?
A) number of patients
B) number of patients times the length of stay per patient
C) number of patients in intensive care and critical care
D) number of pounds of laundry
Miley Company has the following data available:
Sales for the year ended December 31, 2012 $106,950
Gross profit for the year ended December 31, 2012 $45,150
Net income for the year ended December 31, 2012 $7,300
Total Current Assets, December 31, 2012 $18,700
Total Current Liabilities, December 31, 2012 $7,600
Total Assets, December 31, 2012 $48,400
Total Liabilities, December 31, 2012 $20,850
Average total common shares outstanding in 2012 1,000
Market price per share, December 31, 2012 $75.00
Preferred dividends declared during 2012 $4,000
What are the earnings per share for the year ended December 31, 2012?
A) $3.30
B) $4.30
C) $7.30
D) none of the above
Suppose Sunnyside Hotel has annual fixed costs applicable to its rooms of $1.0 million
for its 300-room hotel. Average daily room rents are $60 per room, and average variable
costs are $10 for each room rented. It operates 365 days per year. What is the
break-even point in number of rooms rented?
A) 20,000
B) 30,000
C) 100,000
D) 120,000
The following information pertains to Arnez Company:
Total assets $150,000
Net operating profit after taxes $12,000
Total current liabilities $110,000
Total expenses $160,000
Total liabilities $115,000
Total revenues $180,000
Invested capital is defined as total assets minus current liabilities. The after-tax cost of
capital is 10%. What is the economic profit?
A) $8,000
B) $20,000
C) $40,000
D) $50,000
In agency theory, risk to the manager is defined as ________.
A) probability that a desired outcome will not be achieved
B) possibility that performance will be measured inaccurately
C) probability that an undesirable outcome will be achieved
D) the influence of uncontrollable factors on a manager’s performance