Real Wood Structures Company has invested $1,040,000 in a plant to build small tool
sheds. The target operating income desired from the plant is $156,000 annually. The
company plans annual sales of 1200 sheds at a selling price of $1100 each.
What is the target rate of return on investment for Real Wood Structures Company?
A) 18.0%
B) 15.0%
C) 11.8%
D) 85.0%
A financial analyst for Simon Manufacturing prepared the following report:
Which of the following conclusions can be drawn from the report?
A) All profitable customers achieve customer level operating income in excess of 20%
B) Customer B has the second highest operating income margin
C) The cumulative customer-level operating income of the top eight customers represents
about 105.0% of operating income
D) All customers provide positive contribution towards profitability
Net initial investment includes ________.
A) depreciation on new equipment, cash outflow for working capital, and after-tax cash
inflow from disposal of the old equipment
B) cash outflow to purchase new equipment, depreciation on new equipment, and
after-tax cash inflow from disposal of the old equipment
C) cash outflow to purchase new equipment, cash outflow for working capital, and
after-tax cash inflow from disposal of the old equipment
D) cash outflow to purchase new equipment, cash outflow for working capital, and
depreciation on new equipment
Average number of repeat visits in a spa unit is a ________ measure on a balanced
scorecard.
A) customer perspective
B) financial perspective
C) learning-and-growth perspective
D) internal-business-process perspective
What is a plausible explanation of a cost function has a slope coefficient of $30 for
purchases of 1 to 1,000 units and $25 for production of 1,100 – 2,000 units, and $20 for
production of 2,001 – 3,000 units
A) the fixed cost per unit has decreased because of efficiencies
B) economies of scale allowing for lower cost purchases with larger orders
C) their is a linear cost function in effect
D) contribution margins are decreasing
State Road Fabricators Inc. is considering eliminating Model A02777 because of losses
over the past quarter. The past three months of information for Model A02777 are
summarized below:
Sales (1,100 units) $470,000
Manufacturing costs:
Direct materials 160,000
Direct labor ($15 per hour) 80,000
Overhead 150,000
Operating loss ($80,000)
Overhead costs are 75% variable and the remaining 25% is depreciation of special
equipment for model A02777 that has no resale value.
If Model A02777 is dropped from the product line, operating income will ________.
A) increase by $80,000
B) decrease by $117,500
C) increase by $37,500
D) decrease by $80,000
Coldbrook Company has two sources of funds: long-term debt with a market and book
value of $17,000,000 issued at an interest rate of 11%, and equity capital that has a
market value of $3,000,000 (book value of $4,000,000). Coldbrook Company has profit
centers in the following locations with the following operating incomes, total assets,
and current liabilities. The cost of equity capital is 15%, while the tax rate is 35%.
What is the EVA for Bish Bash Falls? (Round intermediary calculations to four decimal
places.)
A) $530,400
B) $264,061
C) $266,339
D) $159,638
Which of the following statements is true of budgets?
A) Master budgets express management’s operating and financial plans.
B) Financial budgets are prepared before the master budget is prepared.
C) Operating budgets are prepared independently of the master budget.
D) The budgeted balance sheet is the first budget prepared as management is very much
concerned with projected financial position
Shiffon Electronics manufactures music player. Its costing system uses two cost
categories, direct materials and conversion costs. Each product must pass through the
Assembly Department, the Programming department, and the Testing Department.
Direct materials are added at the beginning of the production process. Conversion costs
are allocated evenly throughout production. Shiffon Electronics uses weighted-average
costing.
The following information is available for the month of March 2017 for the Assembly
department.
What is the total amount debited to the Work-in-Process account during the month of
March?
A) $2,540,500
B) $2,194,000
C) $1,831,000
D) $707,000
Which of the following is not true of the weighted-average process-costing method?
A) the method calculates the cost per equivalent unit of all work done to date regardless
of the accounting period in which the work was done
B) the costs in work in process (beginning work in process) when the period starts are
not considered when calculating the weighted-average cost per equivalent unit
C) the weighted-average cost is the total of all costs entering the Work in Process
account divided by the total equivalent units in ending work-in-process inventory
D) the costs to account for are equal to the beginning work in process plus the costs
added to work in process during the same period
Schooner Corporation used the following data to evaluate its current operating system.
The company sells items for $24 each and used a budgeted selling price of $24 per unit.
What is the static-budget variance of operating income?
A) $8,000 favorable
B) $176,000 unfavorable
C) $32,000 favorable
D) $7,000 unfavorable
An example of a qualitative factor for the decision-making process is ________
A) customer satisfaction as determined by written responses given by customers to
survey questions
B) employee wages paid this week
C) number of clicks on a web site during a month
D) manufacturing overhead allocated to WIP
Which of the following is the correct mathematical expression to calculate the fixed
overhead production-volume variance?
A) static-budget amount − flexible-budget amount
B) flexible-budget amount − actual costs incurred
C) actual costs incurred − fixed overhead allocated for actual output
D) budgeted fixed overhead − fixed overhead allocated for actual output
The scenario that says resources should be spent if the expected benefits to the
company exceed the expected costs describes ________.
A) cost-benefit approach
B) behavioral and technical considerations
C) balanced scorecard
D) different costs for different purposes
Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is
analyzed as follows:
T-SHIRTS SWEATSHIRTS
Production and sales volume 64,000 units 40,000 units
Selling price $16.00 $29.00
Direct material $2.50 $ 5.00
Direct labor $4.30 $ 7.20
Manufacturing overhead $1.70 $ 3.00
Gross profit $ 7.50 $13.80
Selling and administrative $4.30 $ 7.00
Operating profit $3.20 $ 6.80
Tiger Pride’s managers have decided to revise their current assignment of overhead
costs to reflect the following ABC cost information:
Under the revised ABC system, overhead costs per unit for the Sweatshirts will be
________. (Do not round interim calculations. Round the final answer to the nearest cent)
A) $1.19 per unit
B) $1.20 per unit
C) $1.90 per unit
D) $1.58 per unit
The Corata Appliance Manufacturing Corporation manufactures two vacuum cleaners,
the Standard and the Super. The following information was gathered about the two
products:
What is the total sales-mix variance in terms of the contribution margin? (Round
intermediary calculations to two decimal places.)
A) $369,600 favorable
B) $295,680 favorable
C) $1,034,880 favorable
D) $665,280 favorable
Which of the following statements is a disadvantage of balanced scorecards?
A) Balanced scorecards ignore short-run objectives.
B) Balanced scorecards may become unwieldy and difficult to understand.
C) Balanced scorecards use a lot of nonfinancial measures.
D) Balanced scorecards are of little use in influencing managerial behavior.
At the Spring Valley Company Company, the cost of the personnel department has
always been charged to production departments based upon number of employees.
Recently, opinions gathered from the department managers indicate that the number of
new hires might be a better predictor of personnel costs.
Total personnel department costs are $282,000.
Department A B C
Number of employees 90 280 210
Number of new hires 15 12 11
If the number of new hires is considered the cost driver, what amount of personnel costs
will be allocated to Department A? (Round any intermediary calculations to two
decimal places and your final answer to the nearest dollar.)
A) $43,759
B) $6,845
C) $109,980
D) $47,913
Budgeted costs are ________.
A) the costs incurred this year
B) the costs incurred last year
C) planned or expected costs
D) competitor’s costs
Which of the following is true of target costing?
A) the target cost is the target price minus the target operating income per unit
B) the target cost includes all past costs to produce the product
C) input from suppliers and distributors are not relevant.
D) a key goal is to minimize value added activities of a product.
Harland Corporation currently produces cardboard boxes in an automated process.
Expected production per month is 20,000 units, direct material costs are $2.50 per unit,
and manufacturing overhead costs are $15,000 per month. Manufacturing overhead is
all fixed costs. What are the flexible budget for 14,000 and 20,000 units, respectively?
A) $14,000; $65,000
B) $14,000; $30,000
C) $50,000; $65,000
D) $50,000; $30,000
Engineered costs ________.
A) have a no repetitive relationship with output
B) have no measurable cause-and-effect relationship between output and resources used
C) include research and development and human resource costs
D) include a high level of certainty
Assume only the specified parameters change in a cost-volume-profit analysis. If the
contribution margin increases by $6 per unit, then ________.
A) fixed costs increases by $6 per unit
B) operating income decreases by $6 per unit
C) fixed costs decreases by $6 per unit
D) operating income increases by $6 per unit
All of the following are reasons why a company might carry a safety stock except:
A) a buffer against unexpected increases in demand
B) a contingency against the uncertainty about lead time
C) a strategy to lower the carrying cost of inventory
D) a way of softening the impact of sudden unavailability of stock from suppliers
The time taken to fulfill clients’ requests is an example of the ________ measure of a
balanced-scorecard.
A) internal business process perspective
B) customer perspective
C) learning and growth perspective
D) financial perspective
Lancelot Corporation manufactures tennis gear and uses budgeted machine-hours to
allocate variable manufacturing overhead. The following information relates to the
company’s manufacturing overhead data:
What is the flexible-budget amount for variable manufacturing overhead?
A) $250,000
B) $306,000
C) $288,000
D) $235,294
Excellent Printing has contracts to complete weekly supplements required by forty-six
customers. For the year 2018, manufacturing overhead cost estimates total $840,000 for
an annual production capacity of 12 million pages.
For 2018, Excellent Printing decided to evaluate the use of additional cost pools. After
analyzing manufacturing overhead costs, it was determined that number of design
changes, setups, and inspections are the primary manufacturing overhead cost drivers.
The following information was gathered during the analysis:
During 2018, two customers, Money Managers and Hospital Systems, are expected to use
the following printing services:
When costs are assigned using the single cost driver, number of pages printed, then
Hospital Systems ________.
A) is fairly billed because resources are allocated uniformly to all jobs
B) is grossly under billed for the job, while other jobs will be unfairly over billed
C) will likely seek to do business with competitors
D) will contribute too little to profits, and Wallace Printing will not want to accept
additional work from the company
J.C Coats Inc. carefully develops standards for its coat making operation. Its
specifications call for 2 square yards of wool per coat. The budgeted price of wool is
$44 per square yard. The actual price for the wool was $36 and the usage was only 1.70
yards of wool per coat. What would be the standard cost per output for the wool?
A) $61.20 per coat
B) $72.00 per coat
C) $88.00 per coat
D) $74.80 per coat
Which if the following are not conversion costs?
A) the cost of direct laborers who assemble the parts of an automobile
B) the cost of tires on an automobile
C) the cost of depreciation on an automobile assembly plant
D) the cost of electricity to run the tools in the automobile assembly plant
Lazy Guy Corporation manufactured 6,000 chairs during June. The following variable
overhead data relates to June:
What is the variable overhead spending variance?
A) $5,110 favorable
B) $5,900 favorable
C) $5,900 unfavorable
D) $5,110 unfavorable
Which of the following is not a concern for management accountants in formulating a
strategy?
A) identifying the most important warehouse location for the distribution of goods
B) substituting products that exist in the marketplace
C) strategizing compliance with GAAP (Generally Accepted Accounting Principles)
D) maintaining adequate fixed assets available to implement the strategy
