1) The contribution margin per unit is how much profit each unit contributes after fixed
costs are considered.
2) The cash budget helps managers determine whether or not the company will need
financing in a given month.
3) The journal entry to record the use of direct materials in Processing Department #1
would include a credit to Raw Materials inventory.
4) The design of a management accounting system should consider how reports affect
employees’ behavior.
5) Integrating sustainable business practices may help to identify new revenue streams
for an organization.
6) Irrelevant costs are costs that do not affect short-term decisions.
7) Controlling costs across the entire value chain often requires a trade-off between the
individual elements of the value chain.
8) Managerial accounting develops reports that help internal parties effectively and
efficiently run the company.
9) Your company sends you to a conference to update your skills. It is a violation of the
professional competency and integrity standards if you decide to skip the afternoon
session and go sightseeing.
10) A price-setter company emphasizes a cost-plus approach to pricing.
11) If inventory has not increased or decreased, but has stayed the same, operating
income will be the same under variable costing and absorption costing.
12) Managerial accounting information tends to report on segments of the business.
13) The costs moved from one processing department to the next processing department
are called “transported-out” costs in the first department and “transported-in” costs in
the next department.
14) Companies that use automated production processes often condense the three
manufacturing costs into two categories: Direct materials and Conversion costs.
15) Ideal standards allow for a normal amount of waste and inefficiency.
16) Favorable sales volume variance for revenues is caused by which of the following?
A) Actual net income for the subunit is greater than budgeted net income
B) Actual sales in dollars are greater than the master budget sales in dollars
C) The flexible budget sales in dollars are greater than the static budget sales in dollars
D) Actual sales in dollars are less than the static budget sales in dollars
17) A company manufactures mirrors. Last month’s costs were:
What were the conversion costs for the month?
A) $302,000
B) $392,000
C) $234,000
D) $90,000
18) Selected financial information for Greek Food Producers is presented in the
following table (000s omitted).
What was operating income?
A) $3,850
B) $4,500
C) $3,180
D) $2,690
19) The regional sales department for Xerox copiers is most likely treated as a(n)
A) cost center
B) investment center
C) profit center
D) revenue center
20) Which term listed below describes costs incurred when the company fails to detect
poor quality goods or services before delivery to the customer?
A) Internal failure costs
B) Value-added activity
C) External failure costs
D) Just-in-time production
21) A graphic designer spends 35 hours working with client #130 during May. Her basic
annual salary is $61,440, while her annual salary plus benefits totals $80,640 per year.
She typically works 40 hours a week for 48 weeks each year. What is the hourly cost to
the firm that employs her?
A) $32
B) $1,470
C) $42
D) $39
22) Which of the following is the formula for computing the price-earnings ratio?
A) Market price per share of common stock/ earnings per share
B) Annual dividend per share of common stock/ market price per share
C) (Net income- preferred dividends)/ number of shares of outstanding common stock
D) Total stockholder’s equity/ number of shares of outstanding common stock
23) The Berwin Company established a master budget volume of 35,000 units for April.
Actual overhead costs incurred amounted to $98,500. Actual production for the month
was 34,000 units. The standard variable overhead rate was $1.75 per direct labor hour.
The standard fixed overhead rate was $1.50 per direct labor hour. One direct labor hour
is the standard quantity per finished unit. Assume the allocation base for fixed overhead
costs is the number of direct labor hours.
A. Compute the total manufacturing overhead cost variance.
B. Compute the overhead flexible budget variance.
C. Compute the production volume variance.
24) How is the fixed overhead budget variance calculated?
A) The difference between the standard fixed overhead rate and the actual fixed
overhead rate multiplied by the actual hours used
B) The difference between the standard fixed overhead costs allocated and the budgeted
fixed overhead costs
C) The difference between the actual fixed overhead costs incurred and the budgeted
fixed overhead costs
D) The difference between the actual fixed overhead costs incurred and the standard
fixed overhead costs allocated
25) Lough Company prepared the following purchases budget:
All purchases are paid for as follows: 20% two months after purchase, 55% in the
following month, and 25% in the month of purchase.
What are the total cash disbursements in October for the purchase of merchandise?
A) $12,275
B) $37,575
C) $41,550
D) $45,495
26) To follow is selected financial data from Turtle Bay Manufacturing for the most
recent year.
What is the beginning raw materials inventory?
A) $19,500
B) $ 5,700
C) $26,700
D) $72,000
27) Using factory utilities would most likely be classified as a ________ cost.
A) unit-level
B) batch-level
C) facility-level
D) product-level
28) Lots of Stuff Company reports the following data for its first year of operation.
What is the cost of goods sold?
A) $365,000
B) $455,000
C) $750,000
D) $505,000
29) The McCumber Corporation data for the current year:
With respect to net sales revenue, what would a horizontal analysis report?
A) There was an increase of 20.00% in net sales revenue
B) There is a sales return of $10.40
C) The cost of goods sold is 77.37% of net sales revenue
D) There is an accounts receivable turnover of 11.17 times
30) Rustic Living Furniture Company manufactures furniture at its central Kentucky
factory. Some of its costs from the past year include:
Manufacturing overhead costs for Rustic Living Furniture Company totaled
A) $171,500
B) $79,000
C) $150,000
D) $217,500
31) Ready Company adds direct materials at the beginning of the process and adds
conversion costs throughout the process. Data for the finishing department follows:
The cost per equivalent unit for conversion costs would be closest to
A) $5.15
B) $4.31
C) $4.69
D) $5.47
32) Ferrero Company reported the following information for the current year:
With respect to current year net sales revenue, what would a vertical analysis report?
A) COGS would be 15.00% of net sales revenue
B) A dividend yield of $8.20
C) A decrease of 10% in net sales revenue
D) Net sales revenue would be the base amount
33) By multiplying the operating leverage factor by the anticipated percentage change
in volume, one can find
A) the anticipated change in operating income
B) the anticipated change in contribution margin
C) the anticipated change in fixed expenses
D) the anticipated change in sales revenue
34) On the statement of cash flows, which of the following activities are included in the
financing activities section?
A) Activities that increase or decrease long-term assets
B) Activities that obtain the cash needed to launch and sustain the business
C) Activities that create revenue or expenses in the entity’s major line of business
D) None of the above
35) Budget committees most often would include all of the following people except
A) CEO
B) Research and development manager
C) Shareholder
D) Marketing manager
36) The first step in developing an ABC system is
A) calculate an activity cost allocation rate for each activity
B) allocate the costs to the cost object using the activity cost allocation rates
C) select an allocation base for each activity
D) identify the primary activities and estimate a total cost pool for each
37) Color Wheel has 3,500 gallons of paint in WIP inventory, with 75% of materials
already added. What are equivalent units in ending WIP inventory for materials if the
paint is 60% through the process?
A) 2,100
B) 2,625
C) 0
D) 525
38) Plowin’ Supply plans to make 15,000 tractors at its plant. Fixed costs are $600,000
and variable costs are $200 per tractor. What is the average cost per tractor?
A) $200
B) $75
C) $240
D) $40
39) For a ________, inventory consists of freight-in and the cost of the product which is
to be resold.
A) service company
B) manufacturing company
C) merchandising company
D) all of these companies
40) At Hodgson Corporation, direct materials are added at the beginning of the process
and conversions costs are uniformly applied. Other details include:
What is the cost per equivalent unit for direct materials?
A) $2.77
B) $3.08
C) $3.21
D) $3.00
41) Here are selected data for Campbell Company:
Manufacturing overhead is allocated at 60% of direct labor cost.
What was the amount of direct labor costs?
A) $78,000
B) $162,581
C) $151,250
D) $242,000
42) To find a firm’s operating leverage factor at a given level of sales, you
A) divide the contribution margin by fixed expenses
B) divide the contribution margin by operating income
C) divide variable expenses by fixed expenses
D) divide relatively operating income by contribution margin
43) The variable overhead rate variance may be caused by variances in the following
production inputs except
A) indirect materials
B) indirect labor
C) fixed manufacturing overhead
D) None of the above impacts the variable overhead rate variance
44) The beginning and ending balances of long-term debt are $64,000 and $35,200,
respectively, and cash payments for long-term debt during the year were $34,100. How
much new long-term debt was issued during the year?
A) New long-term debt issued during the year was $1,100
B) New long-term debt issued during the year was $5,300
C) New long-term debt issued during the year was $28,800
D) New long-term debt issued during the year was $62,900
45) 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 $3,500 will be subtracted from salary expense to determine
payments to employees
B) The increase of $3,500 will be subtracted from net income
C) The increase of $3,500 will be added to salary expense to determine payments to
employees
D) The increase of $3,500 will be added to net income
46) Which of the following best describes a ‘sunk cost”?
A) Costs that were incurred in the past and cannot be changed
B) Benefits foregone by choosing a particular alternative course of action
C) A factor that restricts the production or sale of a product
D) Expected future data that differ among alternatives
47) The standard variable overhead cost rate for the Gordon Company is $11.25 per
unit. Budgeted fixed overhead cost is $50,000. The company budgeted 5,000 units for
the current period and actually produced 4,150 finished units. What is the fixed
overhead volume variance?
Assume the allocation base for fixed overhead costs is the number of units expected to
be produced.
A) $3,780 favorable
B) $2,100 unfavorable
C) $2,100 favorable
D) $3,780 unfavorable
48) Selected financial data for the Photocopies Division of Elizabeth’s Business
Machines is as follows:
What is the Photocopier Division’s residual income?
A) $1,686,400
B) $353,600
C) $1,156,000
D) $1,690,000
49) (Present value tables are required.) Renfroe Corporation is considering the purchase
of a machine that would cost $22,712 and would have a useful life of 5 years. The
machine would generate $6,300 of net annual cash inflows per year for each of the 5
years of its life. The internal rate of return on the machine would be closest to
A) 8%
B) 10%
C) 12%
D) 14%
50) On the line in front of each statement, enter the letter corresponding to the term that
best fits that statement. You may use a letter more than once and some letters may not
be used at all.
a. Direct costs f. Variable costs
b. Marginal cost g. Indirect cost
c. Average cost h. Sunk cost
d. Conversion costs i. Differential cost
e. Prime costs
___The combination of direct materials and direct labor.
___Costs that change in total in direct proportion to changes in volume.
___A cost that relates to the cost object, but cannot be traced to it.
___A cost that has already been incurred.
51) Totz Company produces jump ropes. Totz Company has the following sales
projections for the upcoming year:
Inventory at the beginning of the year was 4,200 jump ropes. Totz Company wants to
have 20% of the next quarter’s sales in units on hand at the end of each quarter. How
many jump ropes should Totz Company produce during the first quarter?
A) 16,800
B) 21,000
C) 23,800
D) 32,200
52) Bohemian Manufacturing manufactures several different products and uses an
activity-based costing system. Information from its system for the year for all products
follows:
The annual production and sales of one of its products, the Sizzler, are 1,500 units. The
following data relate to the production and sales of Sizzlers in the most recent year:
Required:
1> Calculate the activity cost pool rates for each of the three activity cost pools listed.
2> Calculate the average cost of one Sizzler.
53) Totally Technology manufactures Cameras and Video Recorders. The company’s
product line income statement follows:
Management is considering discontinuing the Video Recorder product line. Accountants
for the company estimate that discontinuing the Video Recorder line will decrease fixed
cost of goods sold by $10,000 and fixed marketing and administrative expenses by
$4,000.
Prepare an analysis supporting your opinion about whether or not the Video Recorder
product line should be discontinued.
54) Beyerly Corporation anticipates the following sales revenue over a five month
period:
Byerly Corporation’s sales are 40% cash and 60% credit. The Beyerly Corporation’s
collection history indicates that credit sales are collected as follows:
Required:
Prepare a cash collections budget for each month in the quarter (January, February, and
March) and for the quarter in total.
55) Miller Manufacturing Corporation has the following information regarding direct
materials:
Actual pounds of direct materials
purchased and used47,000
Standard quantity of direct materials2.5 pounds per finished good
Actual production20,000 finished goods
Direct materials quantity variance$11,500 F
Direct materials price variance$ 9,400 U
Compute Miller’s standard price per pound and actual price per pound of direct
materials.
56) Define operating budgets and financial budgets. List the specific budgets which are
operating budgets. List the specific budgets which are financial budgets.
57) Birch Company manufactures coffee makers. The following selected data relates to
Birch Company’s budgeted sales and inventory levels of the coffee makers for the
upcoming quarter. How many coffee makers should Birch Company produce in
November? Show your calculations.
58) Thomas Corporation sells a unit of its product for $12.00, resulting in a contribution
margin of $7.00 per unit. Fixed costs are budgeted at $50,000 per quarter for volumes
up to 12,000 units and $80,000 for volumes exceeding 12,000 units.
Prepare the flexible budget for the next quarter for volume levels of 11,000, 13,000, and
16,000 units.
59) Louise owns a golf course and wants to add some computers to the lounge. The
computers would cost $14,000 and would have a 3 year life and no residual value.
Louise expects the computers to generate $4,000 annual cash inflows for 3 years. The
discount rate is 8%. What is the net present value of the investment?