1) Fixed costs that will continue to exist if a product is discontinued are relevant.
2) Managerial accountants are now considered to be similar to advisors and business
analysts.
3) Accrual-based accounting is not used in determining the accounting rate of return.
4) U.S. GAAP requires companies to use absorption costing for external reporting
purposes.
5) The categories of costs collected by an EMA system are similar to the costs collected
by traditional accounting systems.
6) Goal incongruence frequently exists in decentralized organizations.
7) Service companies do not prepare a cash budget.
8) A scatter plot will help managers identify potential outliers.
9) Customer response time is the time that lapses between the receipt of a customer
order and delivery of the product or service.
10) The statement of cash flows does not report why cash increased or decreased during
the period.
11) Product lines are generally considered profit centers.
12) In a regression output, the “X variable 1 coefficient” represents the variable cost
component of a mixed cost equation.
13) In a horizontal analysis, the earlier period is the base period.
14) When overhead is allocated to every product using the same manufacturing
overhead rate, this rate is called the departmental overhead rate.
15) Rustic Living Furniture Company manufactures furniture at its central Kentucky
factory. Some of its costs from the past year include:
Direct labor costs for Rustic Living Furniture Company totaled
A) $227,500
B) $220,000
C) $100,000
D) $60,000
16) A product support hot line would be considered
A) marketing
B) distribution
C) production or purchases
D) customer service
17) Maple Company uses a job costing system. Maple Company’s schedule of cost of
goods manufactured showed the following amounts for the month ended August 31 .
Allocated manufacturing overhead costs for August amount to $50,000.
What is the amount of work in process inventory (before any adjustment for over
allocated or under allocated manufacturing overhead) on August 31?
A) $57,500
B) $167,000
C) $35,500
D) $138,500
18) (Present value tables are needed.) The Janus Vending Machine Company is looking
to expand its business by adding a new line of vending machines. The management
team is considering expanding into either soda machines or snack machines. Following
is the relevant financial data relating to the decision:
What is the total present value of future cash inflows from the soda machines?
A) $189,930
B) $104,920
C) $62,220
D) $140,220
19) The Top Hat Division of Blandon’s Fine Menswear had the following results last
year (in thousands).
Management’s target rate of return is 12% and the weighted average cost of capital is
9%.
What is the Top Hat Division’s Return on Investment (ROI)?
A) 22.50%
B) 15.00%
C) 150.00%
D) 5.56%
20) Which of the following is an example of the IMA’s competence standard?
A) Provide decision support that is accurate, clear, concise and timely
B) Keep information confidential, except when disclosure is legally required
C) Communicate information fairly and objectively
D) Abstain from engaging in or supporting any activity that might discredit the
profession
21) A cash flow statement shows $14,000 from operations, ($8,500) from investing, and
$23,000 from financing. The cash balance must have increased or decreased by
A) $28,500
B) $14,500
C) $45,500
D) $37,000
22) Jackson Industries has collected the following data for one of its products:
How much is the direct materials quantity variance?
A) $78,550 favorable
B) $27,940 unfavorable
C) $66,550 favorable
D) $78,550 unfavorable
23) The costing system used by a company making computer chips would be
A) process costing
B) job costing
C) equivalent units costing
D) conversion cost costing
24) Carrol Company, which uses an activity-based costing system, produces travel
trailers and boat trailers. The company allocates batch setup costs to the two products
using the following basic data:
Total budgeted setup costs for the year are $158,400.
If the setup costs are allocated using number of setups, how much of the total setup
costs would be allocated to boat trailers?
A) $98,560
B) $59,840
C) $158,400
D) $419,294
25) Stanley’s Candies is considering building a new plant in Europe. It predicts sales at
the new plant to be 40,000 units at $4.00/unit. Below is a listing of estimated expenses:
A European firm was contracted to sell the product and will receive a commission of
10% of the sales price. No U.S. home office expenses will be allocated to the new
facility.
How much does the European contractor expect to make in commissions?
A) $4,000
B) $32,000
C) $80,000
D) $16,000
26) Wet N Wild Sports Equipment Company’s work in process inventory on June 1 has
a balance of $22,400 representing Job No. 265 . During June, $50,000 of direct
materials were requisitioned for Job No. 265 and $35,000 of direct labor cost was
incurred on Job No. 265 . Manufacturing overhead is allocated at 125% of direct labor
cost. Actual manufacturing overhead costs incurred in June amounted to $41,000. No
new jobs were started during June. Job No. 265 is completed on June 28 .
Is manufacturing overhead over allocated or under allocated for the month of June? By
how much?
A) $2,750 under allocated
B) $13,000 over allocated
C) $13,000 under allocated
D) $2,750 over allocated
27) The costs incurred when poor quality goods or services are detected and corrected
before delivery to customers are called ________ costs.
A) appraisal
B) external failure
C) prevention
D) internal failure
28) Schenley Manufacturing builds playground equipment that it sells to elementary
schools and municipalities. Schenley’s management has contracted you to perform a
variance analysis on the fixed manufacturing overhead for its line of slides. Schenley’s
cost accounting team informs you that it allocates fixed overhead based on machine
hours. This period production was budgeted at 375 slides. Budgeted and actual
production data follows:
What is the fixed manufacturing overhead volume variance for this period?
A) $2,750 unfavorable
B) $1,320 unfavorable
C) $2,750 favorable
D) $1,320 favorable
29) To follow is information about the units produced and total manufacturing costs for
Pine Enterprises for the past six months.
Using the high-low method, what will the total monthly manufacturing costs be if the
company produces 9,000 units?
A) $8,750
B) $4,500
C) $8,400
D) $4,250
30) The Jones Corporation uses a process system. During the current period, 2,500 units
were started and 1,100 units were completed and transferred out. Ending units were
60% complete for materials and 45% complete for conversion costs. Direct materials
costs added were $35,405 and conversion costs added were $32,870. There was no
beginning WIP inventory and conversion costs are added evenly throughout the
process. At the end of the period, the cost per equivalent unit for conversion costs
would be closest to
A) $29.88
B) $18.25
C) $19.00
D) $32.19
31) Country Furniture Company manufactures furniture at its Akron, Ohio, factory.
Some of its costs from the past year include:
Direct material costs for Country Furniture Company totaled
A) $82,000
B) $10,000
C) $95,000
D) $92,000
32) What variable represents the volume of activity in the equation: y = vx + f?
(Assume v represents the variable cost per unit of activity.)
A) v
B) x
C) y
D) vx
33) Here is some basic data for Shannon Company:
The journal entry to record the cost of raw materials placed into production involves a
A) debit to overhead for $51,000
B) debit to work in process inventory for $53,000
C) debit to work in process inventory for $51,000
D) credit to manufacturing overhead for $2,000
34) Here is some basic data for Morgenstern Company:
Manufacturing overhead is allocated at 70% of direct labor cost.
What are the total costs debited to work in process inventory during the period?
A) $560,000
B) $540,000
C) $690,000
D) $670,000
35) What will happen to the net present value (NPV) of a project if the discount rate is
increased from 8% to 10%?
A) NPV will always decrease
B) NPV will always increase
C) The discount rate change will not affect NPV
D) We cannot determine the direction of the effect on NPV from the information
provided
36) Nadal Company is debating the use of direct labor cost or direct labor hours as the
cost allocation base for allocating manufacturing overhead. The following information
is available for the most recent year:
If Nadal Company uses direct labor cost as the allocation base, what would the
allocated manufacturing overhead be for the year?
A) $325,500
B) $372,000
C) $701,509
D) $400,000
37) Increased competition with foreign companies and the rise of the global
marketplace is mainly due to which of the following?
A) Globalization
B) The Sarbanes-Oxley Act of 2002
C) Decreased barriers to international trade
D) International financial reporting standards
38) Despite the proliferation of technology, managerial accountants are still needed to
provide professional judgment in which of the following areas?
A) Recording non-routine transactions
B) Adjusting the financial records
C) Designing computer information systems
D) All of the about activities require professional judgment
39) A company would consider all of the following in computing the IRR of an
investment, except
A) predicted cash inflows over the life of the project
B) the cost of the project
C) depreciation expense on the assets of the project
D) present value factors