1) The direct labor rate variance is calculated by multiplying the standard hours that
should have been worked for the actual output by the difference between the standard
labor rate and the actual labor rate.
2) One key to analyzing short-term business decisions is to use a contribution margin
approach that separates variable costs from fixed costs.
3) The graph of total variable cost will be a horizontal line over all activity levels within
the relevant range.
4) The first step of the 5-step process costing procedure is to summarize total costs to
account for.
5) With increased competition, managers need more accurate estimates of product costs
in order to set prices and to identify the most profitable products.
6) The journal entry to record the use of direct labor in Processing Department #1
would include a debit to Wages Payable.
7) Sustainability is an expense item only. An organization choosing sustainability will
see reduced profits.
8) Managerial accounting is becoming less relevant as the U.S. economy shifts away
from the manufacturing industry towards the service industry.
9) The activities in the value chain must take place in a specific order.
10) When performing account analysis, managers decide how to classify each account
as a variable, fixed or mixed cost.
11) A direct materials flexible budget variance can be broken down into a price variance
and a quantity variance.
12) Operating activities on the statement of cash flows include activities that affect net
income, current liabilities and current assets.
13) Gross margin is another term for net income.
14) You are trying to decide whether or not to sell back your accounting textbook at the
end of the class. The cost you paid for the book is not relevant to your decision.
15) Fixed costs per unit decrease as production levels increase.
16) Sustainability considers not only the needs of the present generation, but also the
needs of future generations.
17) All of the following are product mix considerations except
A) What constraint(s) stops us from making (or displaying) all of the units we can sell?
B) Which products offer the highest contribution margin per unit of the constraint?
C) Would emphasizing one product over another affect fixed costs?
D) Which product has the most sunk costs?
18) A(n) ________ is a carefully predetermined cost that is usually expressed on a per
unit basis.
A) allocated cost
B) applied cost
C) standard cost
D) flexible cost
19) Manufacturing overhead is underallocated if the amount
A) estimated for the period is greater than the amount allocated
B) estimated for the period is less than the amount allocated
C) allocated during the period is less than the actual amount incurred
D) allocated during the period is greater than the actual amount incurred
20) The ________ department would most likely be responsible for a ‘sales volume
variance.”
A) marketing
B) production
C) purchasing
D) personnel
21) Lewis Company has operating income of $336,000. Its return on investment (ROI)
is 48%, while its target rate of return is 10%. The total assets of Lewis Company would
be closest to
A) $33,600
B) $3,360,000
C) $161,280
D) $700,000
22) Which of the following is not included in the operating budget?
A) Budgeted income statement
B) Sales budget
C) Inventory budget
D) Budgeted balance sheet
23) A company uses the direct method to prepare the statement of cash flows. It
presents the following amounts on its financial statements.
*Relates solely to the acquisition of inventory
What will appear in the operating activities section related to salary payable?
A) The increase of $4,000 will be subtracted from salary expense to determine
payments to employees
B) The increase of $4,000 will be subtracted from net income
C) The increase of $4,000 will be added to salary expense to determine payments to
employees
D) The increase of $4,000 will be added to net income
24) If the selling price per unit is $32, the variable expense per unit is $19.50, and the
breakeven sales in dollars is $44,800, what are total fixed expenses?
A) $28,718
B) $17,500
C) $1,400
D) $112
25) Columbia Corporation manufactures two products: Tricycles and Wagons. The
annual production and sales of Tricycles is 2,200 units, while 1,750 units of Wagons are
produced and sold. The company has traditionally used direct labor hours to allocate its
overhead to products. Tricycles require 2 direct labor hours per unit, while Wagons
require 1.5 direct labor hours per unit. The total estimated overhead for the period is
$385,125. The company is looking at the possibility of changing to an activity-based
costing system for its products. If the company used an activity-based costing system, it
would have the following three activity cost pools:
Required:
a. Calculate the unit cost for a Wagon using the traditional system based on a single
plantwide overhead rate (use direct labor hours as the cost driver).
b. Calculate the unit cost for a Wagon using the activity-based costing system.
26) A company has monthly fixed costs of $112,500. The variable costs are $6.00 per
unit. If the sales price of a unit is $19.00 and we sell 7,500 units, the total sales revenue
will be
A) $97,500
B) $112,500
C) $142,500
D) $(15,000)
27) Which of the following people is most likely to only use financial accounting
information?
A) Vice president of plant operations
B) Product manager
C) Plant manager
D) Bank loan officer
28) Which of the following was not a result of the Sarbanes-Oxley Act?
A) The COO assumes financial statement responsibility
B) There are new requirements for CPA firms
C) There are stiffer consequences for white-collar crimes
D) Audit committees must be independent
29) Which of the following is the formula to compute day’s sales in receivable?
A) Cost of goods sold/average inventory
B) Net credit sales/average inventory
C) Net credit sales/average net accounts receivable
D) Average net accounts receivable/one day’s sales
30) Monroe Manufacturing produces and sells a product with a price of $100/unit. The
following data has been prepared for its estimated upper and lower levels of activity.
The only variable expenses for this company are
A) indirect materials, direct materials, and direct labor
B) all categories of selling and administrative expenses
C) indirect materials, indirect labor, direct materials, and direct labor
D) none of the above
31) Becky’s Bakery produces two products, cake and pie. Becky’s Bakery sells each
cake for $15.00 and each pie for $10.00. Variable costs for cakes and pies are
respectively, $7.00 and $6.00. There are 3,200 direct labor hours per month available
for producing one of the two products. Fixed manufacturing overhead cost is allocated
at $1,000 per month. Each cake and pie require 2 direct labor hours.
Compute the following:
A. Contribution margin per unit for each product.
B. Contribution margin per direct labor hour for each product.
C. The total number of products produced if only that product is produced each month.
D. Income for a month if only one product is produced and total production is sold.
32) Certain materials used in a manufacturing plant cannot be traced to a specific unit.
What are these materials called?
A) General materials
B) Direct materials
C) Indirect materials
D) Finished materials
33) The ability to meet the needs of the present without compromising the needs of the
future is often referred to as
A) the bottom line
B) total quality management
C) sustainability
D) just-in-time
34) The following information is provided by Galloway Company:
The units were 80% complete for materials and 30% complete for conversion costs.
How much are the total costs for which Galloway has to account (i.e., its total costs to
account for)?
A) $26,500
B) $24,500
C) $39,000
D) $51,000
35) An example of ________ would include an analysis of a table that includes a
balance sheet with dollars and percentages of each item for a company and for the
industry.
A) horizontal analysis
B) ratio analysis
C) vertical analysis
D) benchmarking
36) A company manufactures wallets. Last month’s costs were:
What were the conversion costs for the month?
A) $235,000
B) $390,000
C) $237,000
D) $472,000
37) Beartowne Enterprises uses an activity-based costing system to assign costs in its
auto-parts division.
The following units were produced in December with the following information:
Total unit cost for Part 002 is closest to (rounded):
A) $5.36
B) $5.70
C) $9.37
D) $3.64
38) What term represents the total cost in the equation: y = vx + f?
A) f
B) v
C) vx
D) y
39) The following information relates to Tappan Corporation.
Required:
a.What is the book value per share of common stock for the current year?
b.What is the price-earnings ratio for the current year?
c.What is the rate of return on total assets for the current year?
d.What is the times-interest-earned ratio for the current year?
40) Selected information regarding a company’s most recent quarter follows (all data in
thousands).
What was direct materials used for the quarter?
A) $ 250
B) $ 490
C) $ 1,550
D) $ 820
41) Country Furniture Company manufactures furniture at its Akron, Ohio, factory.
Some of its costs from the past year include:
Conversion costs for Country Furniture Company totaled
A) $415,500
B) $250,500
C) $504,500
D) $352,500
42) Here are selected data for Sally Day Corporation:
What is the finished goods ending inventory?
A) $67,300
B) $287,000
C) $78,300
D) $495,700
43) The income statement for Germain Appliances is divided by its two product lines,
Toasters and Microwaves, as follows:
If Germain Appliances can eliminate fixed costs of $32,000 by discontinuing the
Microwave line, then discontinuing it should result in which of the following?
A) Increase in total operating income of $45,000
B) Increase in total operating income of $13,000
C) Decrease in total operating income of $13,000
D) Decrease in total operating income of $45,000
44) The Box Manufacturing Division of the Allied Paper Company reported the
following results from the past year. Shareholders require a return of 7%. Management
calculated a weighted-average cost of capital (WACC) of 5%. Allied’s corporate tax rate
is 30%.
What is the division’s Return on Investment (ROI)?
A) 25.00%
B) 11.67%
C) 40.00%
D) 46.67%
45) Companies with production constraints and irrelevant fixed costs will be most
profitable when they maximize production of the product with the highest
A) sales price
B) demand for the product
C) contribution margin per unit of the constraint
D) contribution margin per unit
46) The Stemple Corporation data for the current year:
What would a horizontal analysis report with respect to current assets?
A) Inventory turnover of 7.11 times
B) Current ratio of 1.24
C) A 22% increase in current assets
D) Current assets as 26.61% of total assets
47) A company’s Board of Directors meets
A) quarterly
B) periodically, as needs dictate
C) monthly
D) annually
48) Getting to school for your 8 a.m. class doesn’t leave much time for breakfast, and
you are quite hungry by the time class ends. It is a long walk to the cafeteria, the lines
are long once you get there, and you find yourself having to decide between having
breakfast and getting to your next class on time. Many of your friends have expressed
the same problem. The administration has agreed to let you set up a table just outside
the building where you will sell various snacks for $1 each. You have agreed to pay the
administration $400 per month and salaries to your friends to run the business will be
another $400 per month. It will cost you 60 cents each to buy the pre-packaged snacks.
You believe you can sell 2,500 snack packs per month.
a.What are the total fixed costs per month?
b.What are the total variable costs per month?
c.What is the fixed cost per snack pack?
d.What is the variable cost per snack pack?
e.What is the average cost per snack pack?
f.What is the average profit margin per snack pack?
g.Based on your analysis, should you start the snack pack business?
49) Selected information regarding a company’s most recent quarter follows (all data in
thousands).
What was direct materials used for the quarter?
A) $790
B) $1,280
C) $390
D) $140
50) The human resources department for a steel manufacturer is likely to be classified
as a(n)
A) investment center
B) cost center
C) profit center
D) revenue center
51) A common definition of ________ is the ability to meet the needs of the present
without compromising the ability of future generations to meet their own needs.
A) environmental management accounting
B) sustainability
C) triple bottom line
D) carbon footprint