During a period of inflation, the LIFO method reports a larger cost of goods sold
amount than FIFO.
The elements of a financial budget for a merchandising firm include the capital budget,
the cash budget and the budgeted balance sheet.
When the actual production volume exceeds the expected production volume, fixed
overhead is underapplied.
Managers may use different markup rates for different categories of costs.
Indirect production costs can be ignored because they do not affect the cost of a
product.
The proration method of disposing of an overhead variance prorates the variance among
three accounts that include Direct Materials Inventory, Work-in-Process Inventory and
Finished Goods Inventory.
In a linear cost function estimated by regression analysis, the constant or intercept
measures variable cost per unit of the cost driver.
The entire firm may be a responsibility center for the firm’s president.
Backflush costing has no Work-In-Process Inventory account.
Revenues do not affect stockholders’ equity.
In cases of constrained capacity, the opportunity cost of transferring a product internally
is zero.
The inventory method a company uses does not affect its income statement.
A well-designed management control system ignores nonfinancial objectives and
focuses on financial objectives to develop and report performance measures.
The marginal income tax rate is the tax rate paid on additional amounts of pretax
income.
The variable-costing method regards fixed manufacturing costs as a period expense
when incurred.
Return on investment equals return on sales divided by capital turnover.
Increased productivity can be shown by maintaining the number of inputs but
increasing the number of outputs.
The time and effort spent negotiating a transfer price between a company’s divisions
adds nothing directly to the profits of a company.
Qualitative aspects of information can carry more weight than quantitative aspects in a
business decision.
When selecting a cost driver for a budgeted overhead rate, no one cost driver is
appropriate for all situations.
Nonoperating items on a multiple-step income statement include interest expense and
interest income.
A budget is a qualitative expression of a plan of action.
In the management control system, feedback and learning affect all elements of the
system.
An audit guarantees that there are absolutely no mistakes in the financial statements.
Financial statements for partnerships do not make distinctions between paid-in capital
and retained earnings.
A cost object is anything for which a separate measurement of costs is desired.
Nonfinancial measures of performance include profit targets and required return on
investment.
A quantity variance for direct materials measures the deviation between the quantity of
inputs that should have been used to achieve the actual output and the actual quantity of
inputs used to achieve the actual output.
The break-even point is located at the intersection of the total revenue line and the total
costs line on a cost-volume-profit graph.
In managerial accounting, variable cost is a reasonable approximation of marginal cost
in many situations.
When choosing among several investments, managers should pick the project with the
highest net present value.
Liabilities are economic resources.
Cost assignment is attaching costs to one or more cost objects, such as activities and
departments.
In practice, it may be too costly to have several cost-allocation bases for applying
overhead costs to products.
The purpose of performance measures is to set direction and to motivate managers.
Most companies make capacity decisions frequently.
Branson Company purchased 40% of the outstanding shares of Missouri Company as a
long-term investment. At the end of the year, the market value of the shares increased.
The increase in market value of Missouri Company’s shares will affect Branson
Company in which of the following ways?
A) increasing assets and increasing stockholders’ equity
B) decreasing investments and increasing cash
C) increasing investments and increasing stockholders’ equity
D) no effect
A cost accounting system called GPK uses ________ cost pools to allocate ________.
A) 10-20; indirect manufacturing costs
B) 1-10; direct manufacturing costs
C) 400 to 2000; indirect manufacturing costs
D) 1-20; direct manufacturing costs
Audrey Company has the following data:
Month Budgeted Sales
May $46,000
June 50,000
July 52,000
August 48,000
The cost of goods sold percentage is 65% of sales and the desired ending inventory is
25% of next month’s sales at cost. What are the total purchases budgeted for July?
A) $33,150
B) $33,800
C) $41,600
D) $42,250
Bertinoli’s Company makes gadgets. The company uses process costing. All direct
materials are introduced at the end of the process. Conversion costs are incurred evenly
throughout the process. In February, there was no beginning Work-in-Process Inventory,
but 490,000 units were started. At the end of February, there were 90,000 units still in
process at the 70% level of completion. Total costs incurred during February were
$1,212,500 for materials and $3,664,000 for conversion costs.
Required:
A) Compute the number of units completed and transferred.
B) Compute the equivalent units for materials and conversion costs.
C) Compute the cost per equivalent unit for materials and conversion costs. Round to
two decimal places.
D) Compute the cost of the units completed and transferred.
E) Compute the cost of ending work-in-process inventory.
Litfin Company has the following information available for the month of March:
Units Transferred- Direct Conversion
in Costs Materials Costs
Work-in-process inventory, March 1 240 $33,600 0 $18,000
*Percent complete 100% 0% 62.5%
Transferred-in during March 400
Completed in March 440
Work-in-process inventory, March 31 200
*Percent complete 100% 0% 80%
Costs added in March $52,000 $13,200 $48,600
The company uses the weighted average cost method. What is the cost per equivalent
unit for March for direct materials?
A) $20.63
B) $22.00
C) $30.00
D) $33.00
When using the visual-fit method to estimate a cost function, we can estimate the fixed
cost by ________.
A) the point where the sketched line (through all or most of the data points) intersects
the x-axis
B) the point where the sketched line (through all or most of the data points) intersects
the y-axis
C) calculating the variable cost per unit of the cost driver
D) subtracting the variable cost at any cost driver level from the total cost
In a master budget, the schedule of cash disbursements for operating expenses is used to
prepare the ________.
A) capital budget
B) purchases and cost of goods sold budget
C) sales budget
D) cash budget
The following information was gathered for Edwards Company:
Budgeted direct labor hours 75,000
Actual direct labor hours 77,500
Budgeted factory overhead costs $562,500
Actual factory overhead costs $540,000
Cost driver of overhead costs Direct labor hours
Required:
A) Compute the budgeted factory overhead rate.
B) Compute the factory overhead applied.
C) Compute the amount of underapplied or overapplied factory overhead.
The phrase “cost application” refers to the allocation of the total departmental costs to
________.
A) service departments
B) service departments and producing departments
C) revenue-producing departments
D) revenue-producing products
When making a make-or-buy decision for a part used in a product, which of the
following item is relevant to the decision?
A) variable costs of making the part
B) contribution margin on new products manufactured in idle area not used for making
part
C) rental income from idle plant when not making the part
D) all of the above
May Company has the following information:
Month Budgeted Purchases
January $33,000
February 37,000
March 31,000
April 30,000
May 27,680
Purchases are paid as follows:
75% in the month of purchase
25% one month after purchase
What is the expected balance in Accounts Payable on April 30?
A) 0
B) $7,500
C) $20,250
D) $30,000
The variable overhead efficiency variance depends on whether the quantity of the cost
driver used is more or less than ________.
A) the standard amount of output for the expected amount of output
B) the quantity allowed for the expected amount of output
C) the quantity allowed for the static budget amount of output
D) the standard quantity allowed for the actual output
When preparing segmented income statements, unallocated costs include ________.
A) costs controlled by others(not segment managers)
B) central corporate costs
C) costs controllable by segment managers
D) costs traced to segments
Gomez Company makes three types of products. The company has two types of
customers. The cost to serve all customers is $12,000 and is allocated to customer types
based on the number of manager visits to customer locations. The following data are
available:
Product 1 Product 2 Product 3
Sales $5,000 $6,000 $30,000
Cost of goods sold 4,000 4,800 15,000
Gross margin $1,000 $1,200 $15,000
Customer Type 1 Customer Type 2
Product 1 Sales $500 $4,500
Product 2 Sales $1,000 $5,000
Product 3 Sales $16,000 $14,000
Manager visits 4 16
What is the gross profit margin for all three products for Customer Type 1?
A) $8,000
B) $8,200
C) $8,250
D) $8,300
What is Six Sigma?
A) a process improvement to eliminate waste from the entire enterprise
B) a process improvement to reduce the time products spend in the production process
C) a process improvement to reduce the time products spend in activities that do not
add value
D) a data-driven approach to eliminate defects in any process
When should a company use an activity-based flexible budget with multiple cost
drivers instead of a simple flexible budget with one cost driver?
A) when a significant portion of costs vary with only one cost driver
B) when a significant portion of costs vary with the number of units of output
C) when a significant portion of costs vary with the number of units of sales
D) when a significant portion of costs vary with cost drivers other than units of output
Which of the following is NOT a type of quality costs?
A) prevention
B) appraisal
C) internal failure
D) development
To calculate economic value added, several adjustments are made to after tax operating
profit that include ________ and ________.
A) the use of LIFO inventory valuation; capitalization of research and development
costs
B) taxes paid rather than tax expense; capitalization of research and development costs
C) the use of average cost inventory valuation; current costs of fixed assets
D) the use of LIFO inventory valuation; current costs of fixed assets
USA Bank held a party. USA Bank expected attendance of 100 people and prepared the
following budget:
Hotel room rental $600
Food 500
Entertainment 800
Decorations 300
Total Costs $2,200
One hundred people attended the party. The following costs were incurred:
Hotel room rental $575
Food 640
Entertainment 750
Decorations 350
Total Costs $2,315
What is the variance for the cost of food?
A) $115 Unfavorable
B) $140 Favorable
C) $115 Favorable
D) $140 Unfavorable
The company that owns 100 percent of another company’s stock is called the ________.
The company that is controlled by another company is called the ________.
A) majority interest; minority interest
B) controlling interest; noncontrolling interest
C) parent; subsidiary
D) subsidiary; segment
On January 1, 2015, Arizona Company acquired a machine for $33,000. Annual
depreciation expense equals $3,000. The residual value of the machine is $3,000. What
is the book value of the machine on December 31, 2016?
A) $3,000
B) $27,000
C) $30,000
D) $33,000
A grocery store manager is responsible for the operating performance of a grocery
store. From the manager’s point of view, which of the following is NOT a controllable
cost?
A) temporary stocking staff hired to reorganize products in every aisle
B) supplies in break room that include coffee, cups, donuts, cookies and stirring sticks
C) fee charged by pest management company to apply pesticide
D) rent expense on store building
When managers use the decision process to make decisions, what is the output after
using the prediction method?
A) decision
B) implementation
C) predictions
D) evaluation
Managers apply two criteria to obtain accurate and useful cost functions. These criteria
are ________.
A) plausibility and believability
B) plausibility and reliability
C) reliability and validity
D) validity and plausibility
Comerowski Industries Inc. reported the following information about the production
and sale of its only product during the first month of operations:
Selling price per unit $100.00
Sales $100,000
Direct materials used $37,500
Direct labor $36,000
Variable factory overhead $25,500
Fixed factory overhead $20,000
Variable selling and administrative expenses $2,000
Fixed selling and administrative expenses $7,500
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 1,200 units
Under variable costing, what is the total contribution margin?
A) $10,500
B) $31,500
C) $49,500
D) $53,000
Increases in revenues will ________. Increases in expenses will ________ .
A) increase Retained Earnings; increase Retained Earnings
B) increase Retained Earnings; decrease Retained Earnings
C) decrease Paid in Capital; decrease Paid in Capital
D) increase assets; increase liabilities
In which of the following scenarios can Eastman Company NOT have favorable
flexible budget variance for direct materials?: When direct material price variance is
________, and when direct material quantity variance is ________,
A) favorable; unfavorable
B) unfavorable; favorable
C) unfavorable; unfavorable
D) favorable; favorable
When the actual overhead costs exceed the amount of applied overhead costs, the
overhead costs are ________. At the end of the accounting period, accountants dispose
of the underapplied or overapplied overhead using ________ or ________.
A) overapplied; proration; immediate write-off
B) underapplied; proration; immediate write-off
C) overapplied; flexible budget variance; proration
D) underapplied; flexible budget variance; immediate write-off
Freund Company produces calendars in a one-department process. The following data
is available for the past month:
Work-in-process inventory, beginning 0
Units started 15,000
Units completed and transferred 12,000
Units in ending inventory 3,000
Direct materials added $30,000
Direct labor $20,700
Factory overhead costs $10,350
The units in process at the end of the month are 100 percent complete with respect to
materials and 60 percent complete with respect to conversion costs. What are the total
costs to account for?
A) $20,700
B) $30,000
C) $50,700
D) $61,050
Joseph Industries Inc. reported the following information about the production and sale
of its only product during the first month of operations:
Selling price per unit $100.00
Sales $100,000
Direct materials used $37,500
Direct labor $36,000
Variable factory overhead $25,500
Fixed factory overhead $20,000
Variable selling and administrative expenses $2,000
Fixed selling and administrative expenses $7,500
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 1,200 units
Under variable costing, what is the variable manufacturing cost of goods sold?
A) $45,000
B) $54,000
C) $101,000
D) $119,000
Assume you are preparing an income statement with different segments. To calculate
the contribution by segment, take contribution controllable by segment manager minus
________.
A) unallocated costs
B) variable operating expenses
C) fixed costs controllable by others(not segment manager)
D) fixed costs controllable by segment manager
What journal entry is necessary to apply factory overhead to jobs in job-order costing?
A) Work-In-Process Inventory XXX
Factory Department Overhead Applied XXX
B) Finished Goods Inventory XXX
Factory Department Overhead Applied XXX
C) Factory Department Overhead Control XXX
Various accounts XXX
D) Work-In-Process Inventory XXX
Factory Department Overhead Control XXX
If the projected cost for a new product to be manufactured exceeds the target cost, what
measures can the company undertake to reduce the projected cost?
A) kaizen costing
B) value engineering
C) supplier negotiations
D) all of the above
Yellow Cake Company planned to produce and sell 900 units at a total cost of
$180,000. Actual production and sales were 900 units at a cost of $170,000. The
company was ________.
A) efficient and ineffective
B) inefficient and ineffective
C) inefficient and effective
D) efficient and effective