For costs that accountants cannot directly trace to products or services, accountants use
________ or ________.
A) ABC methods; payback method
B) cost-budgeting methods; ignore remaining costs
C) sensitivity analysis; financial planning models
D) cost-allocation methods; leave costs unallocated
When undertaking a capital budgeting problem with taxes, the total cash effect of
depreciation expense on a long-term asset is equal to ________.
A) $0
B) depreciation expense times the tax rate
C) depreciation expense times (1 minus the tax rate)
D) depreciation expense divided by the tax rate
Which of these costs is a direct cost for a manufactured wood chair?
A) Rent Expense for factory building
B) Depreciation Expense on factory equipment
C) Wood used to manufacture chair
D) Salary Expense of factory supervisor
Vanessa Company purchased common stock in Gilmore Company. During the current
year, Gilmore Company earned $4,000,000 and paid dividends of $1,000,000. Assume
that Vanessa Company owns 40 percent of the outstanding shares of Gilmore Company.
Gilmore Company’s net income will affect Vanessa Company by ________.
A) increasing investments by $1,600,000
B) increasing investments and cash by $2,000,000
C) increasing cash and stockholders’ equity by $400,000
D) increasing cash and decreasing investments by $1,600,000
In companies with segment autonomy, who determines the transfer price for internal
sales and purchases of products?
A) all segment managers
B) segment mangers involved in transfer
C) upper management
D) outside suppliers
Kemp Company manufactures three products from a joint process. Joint costs for the
year amounted to $250,000. The following data was available:
Product Units Produced Sales Value at Split-off
X 5,000 $70,000
Y 3,000 $30,000
Z 2,000 $100,000
Assume the relative-sales-value method of allocating joint costs is used. What amount
of joint costs is allocated to Product Y?
A) $30,000
B) $37,500
C) $75,000
D) $250,000
Minnesota Company has no beginning and ending inventories, and has the following
data about its only product:
Fixed manufacturing costs $92,000
Fixed selling and administrative costs $69,000
Variable manufacturing costs $1,030,000
Variable selling and administrative costs $120,000
Selling price(per unit) $125
Units produced and sold 23,000
Assume there is excess capacity. The company has received a special order for 1,000
units at $60.00 per unit. If the special order is accepted, what will be the effect on net
income?
A) net income increases by $3,000
B) net income increases by $6,000
C) net income increases by $10,000
D) net income increases by $15,220
The two key items in determining the budgeted factory overhead rate are total budgeted
factory overhead costs and ________.
A) actual amount of the cost driver
B) total actual factory overhead costs
C) budgeted cost-allocation base level
D) total estimated factory overhead costs
A magazine publisher sells annual subscriptions for magazines. The publisher requires
cash payment before the magazines are sent out. When the first monthly issue is sent
out, the company will ________.
A) increase liabilities and increase assets
B) increase assets and increase revenues
C) increase revenues and decrease liabilities
D) increase liabilities and decrease revenues
________ is the field that produces information used primarily by managers within an
organization.
A) Financial accounting
B) Management accounting
C) Internal auditing
D) External auditing
For manufacturing companies, an example of a period cost is ________.
A) direct materials
B) research and development expense
C) direct labor
D) factory overhead
The Stelloh Company reports the following information:
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
Dividends per share, for the year ended December 31, 2012 $5.00
What is the dividend payout for the year ended December 31, 2012?
A) 6.7%
B) 9.7%
C) 65.8%
D) 68.5%
A machine that costs $180,000 is expected to generate $40,000 in cost savings annually
for five years. The terminal value at the end of five years is $10,000. Assume
straight-line depreciation is used. Ignore income taxes. What is the payback period?
A) 3.00 years
B) 4.00 years
C) 4.20 years
D) 4.50 years
The marginal tax rate for a company is the ________.
A) average tax rate for the company
B) highest possible tax rate that may be imposed on the company by IRS
C) lowest tax rate that may be imposed on the company by IRS
D) tax rate paid on additional amounts of pretax income
In net present value analysis, the minimum desired rate of return for an investment
project depends on the ________ of a proposed project.
A) expected return
B) desired return
C) risk
D) payback period
The following information is available for Paperback Books Inc. and its two divisions,
Books and Periodicals:
Whole Books Periodicals
Company Division Division
Division
Net Sales $100,000 $60,000 $40,000
Fixed Costs Controllable
By Division Manager 26,500 22,500 4,000
Fixed Costs Not Controlled
By Division Manager 18,000 15,000 3,000
Variable Costs:
Cost of Merchandise Sold 24,500 17,500 7,000
Operating Expenses 26,400 20,000 6,400
Unallocated Costs 7,000
What is the contribution margin for the Books Division?
A) $15,000
B) $22,500
C) $32,500
D) $42,500
Capricorn Company’s records reveal the following:
Division X
Market price of finished component to outsiders $32 per unit
Variable costs per component $24 per unit
Division Y
Sale price of finished product $42 per unit
Variable costs:
Division X (1 component) ?
Division Y Assembly 9 per unit
Division Y Packaging 4 per unit
Division Y wants to buy the component from Division X. The variable costs of Division
Y will be incurred whether it buys the component from Division X or from an outside
supplier. Division Y can buy the component for $30 per unit from an outside supplier.
Division X has no excess capacity. What is the highest price per unit that Division Y
should pay to Division X for the components?
A) $22 per unit
B) $29 per unit
C) $30 per unit
D) $32 per unit
When preparing the budgeted income statement, which of the following is the source
for the amount of Cost of Goods Sold?
A) sales budget
B) operating expense budget
C) schedule of disbursements for operating expense
D) purchases and cost of goods sold budget
A company has the following information available about one of its products:
Standard price per pound of input ?
Actual price per pound of input $27
Standard inputs per unit of output 3 pounds
Actual units of output 3,000
Direct Materials Price Variance $18,000 F
Actual pounds of input used 9,000
What is the standard price per pound of input?
A) $25
B) $27
C) $29
D) $33
Variable overhead efficiency variances are unfavorable when actual cost driver activity
exceeds the ________.
A) standard cost-driver activity allowed for the actual output
B) activity allowed for the expected output
C) activity allowed for the planned output
D) activity allowed for last period’s output
Segal Company has the following data:
Month Budgeted Sales
May $46,000
June 50,000
July 52,000
August 49,000
The cost of goods sold percentage is 80% of sales and the desired ending inventory
level is 25% of next month’s sales at cost. What is the beginning inventory on August 1?
A) $4,200
B) $8,450
C) $9,800
D) $10,400
The contribution approach to the income statement emphasizes the distinction between
________.
A) value chain functions
B) different functional areas in a firm
C) different business segments
D) variable and fixed costs
Ruth Company has a tax rate of 40% and a required rate of return of 12%. The company
has new equipment that saves $200,000 per year in labor costs. What is the annual
after-tax cash flow from the labor cost savings?
A) $80,000 cash outflow
B) $80,000 cash inflow
C) $120,000 cash outflow
D) $120,000 cash inflow
Treasury stock is shown on the balance sheets as a deduction from ________.
A) total assets
B) total liabilities
C) total current assets
D) total stockholders’ equity
When calculating the net cash provided by operating activities, which procedure should
NOT be carried out? Assume the indirect method is used.
A) add depreciation expense
B) subtract a decrease in accounts payable
C) subtract a decrease in prepaid expenses
D) add a decrease in inventories
Assume the following information for Janice Company:
Selling price per unit $100
Variable costs per unit $80
Total fixed costs $80,000
If fixed costs increased by 10% and management wanted to maintain the original
break-even point, then the selling price per unit would have to be increased to
________.
A) $101.00
B) $102.40
C) $102.00
D) $103.00
Benton Company manufactures a part for its production cycle. The costs per unit for
38,000 units of the part are as follows:
Per Unit
Direct materials $3.00
Direct labor 5.00
Variable factory overhead 3.00
Fixed factory overhead 4.00
Total costs $15.00
The fixed factory overhead costs are unavoidable. Assume no other use for the
facilities. What is the highest price Benton Company should pay for the part from an
outside supplier?
A) $8
B) $11
C) $12
D) $15
St. Matthew’s Hospital uses a job-order costing system for all patients who have
surgery. The following information is available:
Budgeted indirect costs—pre-operating room $84,000
Budgeted indirect costs—operating room $66,000
Budgeted indirect costs—surgery recovery floor $600,000
Budgeted nursing hours—pre-operating room 4,000
Budgeted nursing hours—operating room 1,000
Budgeted nursing hours—surgery recovery floor 7,500
The cost driver for all indirect costs is nursing hours. The hospital uses a budgeted rate
for indirect costs. The budgeted rate for indirect costs for the pre-operating room is
________.
A) $21.00
B) $43.25
C) $66.00
D) $80.00
Which action will decrease a company’s break-even point?
A) reducing total fixed costs
B) decreasing contribution margin per unit
C) increasing variable cost per unit
D) decreasing the selling price per unit
Schaefer Company has no beginning and ending inventories, and reports the following
data about its only product:
Direct materials used $200,000
Direct labor $80,000
Fixed indirect manufacturing $100,000
Fixed selling and administrative $150,000
Variable indirect manufacturing $20,000
Variable selling and administrative $60,000
Selling price(per unit) $50
Units produced and sold 10,000
Schaefer Company uses the contribution approach to prepare the income statement.
What is the contribution margin?
A) $100,000
B) $140,000
C) $200,000
D) $220,000
Olson Company has three departments. Data for the most recent year is presented
below:
Dept. C Dept. A Dept. T
Sales $4,000 $1,920 $2,240
Variable expenses 3,280 1,420 520
Unavoidable fixed expenses 480 180 440
Avoidable fixed expenses 555 265 360
Operating income (loss) $(315) $55 $920
Olson Company is considering eliminating Dept. C because it is operating at a loss.
Required:
A) Compute the change in operating income if Olson Company eliminates Dept. C and
does not replace it.
B) Compute the change in operating income if Olson Company eliminates Dept. C and
doubles the sales of Dept. T without increasing fixed costs.
If fixed production costs are not allocated to manufactured products, this conveys the
idea that ________.
A) fixed costs are not necessary to manufacture a product.
B) fixed costs are necessary to manufacture a product.
C) variable costs are less important than fixed costs to manufacture a product.
D) fixed costs are more important than variable costs to manufacture a product.