1) The primary managerial accounting product is the company’s audited financial
statements.
2) Companies use job costing when their products or services vary in terms of materials
needed, time required to complete the product, and/or the complexity of the production
process.
3) Unit-level activities and costs are incurred for every single unit.
4) For a manufacturing system, inventory flows from raw materials inventory to work
in process inventory to finished goods inventory.
5) The fixed cost per unit does not always remain the same.
6) Standard costs for production inputs are used to develop flexible budgets.
7) When graphing total fixed costs, the cost line always begins at the origin.
8) If unit sales prices, unit variable costs and total fixed costs all remain the same, but
the sales mix changes, there is an effect on the breakeven point.
9) Residual income is the difference between revenues and expenses.
10) Only the income statement approach may be used to calculate the breakeven point.
11) Common size statements allow the comparison of two or more companies with
different amounts of net sales and net assets.
12) An R-square value of 0.00 indicates a perfect relationship between the volume of
activity and the cost being analyzed.
13) The only skill required of managerial accountants is that they have a solid
knowledge of both financial and managerial accounting.
14) The journal entry to record the use of direct materials in Processing Department #1
would include a debit to WIP-Processing Department #1 .
15) A budget is a quantitative expression of a plan that helps managers coordinate and
implement the plan.
16) ABC tends to increase the unit cost of low-volume products and decrease the unit
cost of high-volume products.
17) Wallace Industries wanted to determine the relationship between its monthly
operating costs and a potential cost driver, machine hours. The output of a regression
analysis showed the following information (note: only a portion of the regression
analysis results is presented here):
What is closest to the total cost if the firm uses 4,200 machine hours?
A) $5,964.03
B) $3,018.08
C) $2,945.95
D) $12,372,975.38
18) The intersection of the sales revenue line and the variable expense line on a CVP
graph is known as
A) the margin of safety point
B) the unit contribution margin
C) the breakeven point
D) none of the above
19) Smith & Cramer, Computer Repair, is considering an investment in computer and
network equipment costing $254,000. This equipment would allow them to offer new
programming services to clients. The equipment will be depreciated on the straight-line
basis over an eight-year period with an estimated residual value of $60,000. Using the
accounting rate of return model, what is the minimum average annual operating income
that must be generated from this investment in order to achieve an 11% accounting rate
of return?
A) $6,600
B) $21,340
C) $31,750
D) $27,940
20) The manager of the corporate division of Anthropologie (a retail clothing chain)
would be in charge of a(n)
A) investment center
B) cost center
C) profit center
D) revenue center
21) The Hummel Corporation reported the following income statement and balance
sheet amounts and additional information for the end of the current year.
Inventory and prepaid expenses account for $28,000 of the current year’s current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company’s rate of return on common stockholder’s equity for the current
year?
A) 32.00%
B) 42.11%
C) 6.00%
D) 30.77%
22) Selected information regarding a company’s most recent quarter follows (all data in
thousands).
What was the beginning finished goods inventory?
A) $ 2,100
B) $ 500
C) $ 710
D) $ 800
23) ________ may include shareholders, bankers, special interest groups, employees,
policy makers, customers, suppliers, or community members.
A) Stakeholders
B) Regulations
C) Constraints
D) None of the above
24) At Onyx Incorporated, 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 conversion costs?
A) $1.73
B) $2.00
C) $1.82
D) $2.18
25) Challenge Tennis & Recreation’s operating activities for the year are listed below.
What is the cost of goods sold for the year?
A) $201,000
B) $164,000
C) $174,000
D) $97,000
26) To check the accuracy of the ending total on the statement of cash flows, the
balance in the ________ can be used.
A) asset and liability accounts
B) liability accounts
C) cash and cash equivalent accounts
D) asset accounts
27) Cuyahoga Valley Bicycles uses a standard part in the manufacture of several of its
bikes. The cost of producing 40,000 parts is $138,000, which includes fixed costs of
$68,000 and variable costs of $70,000. The company can buy the part from an outside
supplier for $3.50 per unit, and avoid 30% of the fixed costs.
If Cuyahoga Valley Bicycles makes the part, how much will its operating income be?
A) $90,400 less than if the company bought the part
B) $45,600 less than if the company bought the part
C) $47,600 greater than if the company bought the part
D) $49,600 greater than if the company bought the part
28) Selected information about The Staccato Company for the current year and prior
year is given below.
The current year’s selling and general expenses percentage (as would be found on a
vertical analysis of the income statement for the current year) is
A) 22.00%
B) 23.96%
C) 152.47%
D) 14.43%
29) The Cosmo Corporation manufactures and assembles office chairs. Cosmo uses an
activity-based costing system to allocate all manufacturing conversion costs. Each chair
consists of 15 separate parts totaling $125 in direct materials, and requires 2.0 hours of
machine time to produce. Additional information follows:
What is the cost of materials handling per chair?
A) $26.25
B) $7.50
C) $5.50
D) $4.00
30) Twinkle Ornaments Company uses job costing. Twinkle Ornaments Company has
two departments, Trimming and Finishing. Manufacturing overhead is allocated based
on direct labor cost in the Trimming Department and direct labor hours in the Finishing
Department. The following additional information is available:
Actual data for completed Job No. 650 is as follows:
What is the predetermined manufacturing overhead rate for the Finishing Department?
A) $10.00 per direct labor hour
B) $12.00 per direct labor hour
C) $7.50 per direct labor hour
D) $60.00 per direct labor hour
31) Fixed expenses total $31,000, the breakeven sales in dollars is $93,000 and the
selling price per unit is $99. The variable expense per unit is
A) approximately $33
B) approximately $66
C) approximately $132
D) approximately $198
32) Swiss Furniture Company manufactures bookshelves and uses an activity-based
costing system. The following information is provided for the month of May:
Each bookshelf consists of 4 parts. The direct materials cost per bookshelf is $30.00.
What is the cost of materials handling and assembling per bookshelf?
A) $ 8.00
B) $24.80
C) $22.00
D) $14.00
33) Beginning WIP inventory is 900 units; completed and transferred out were 3,400
units; and Ending WIP inventory is 800 units. What is the number of units started?
A) 3,300
B) 2,600
C) 3,400
D) 4,200
34) Total fixed costs for Taylor Incorporated are $240,000. Total costs, including both
fixed and variable, are $500,000 if 125,000 units are produced. The variable cost per
unit is
A) $5.92/unit
B) $2.08/unit
C) $4.00/unit
D) $1.92/unit
35) Poland’s Paints allocates overhead based on machine hours. Selected data for the
most recent year follow.
The estimates were made as of the beginning of the year, while the actual results were
for the entire year.
The predetermined manufacturing overhead rate per machine hour is closest to
A) $10.58
B) $12.20
C) $10.84
D) $11.90
36) The cost of searching for a supplier of higher quality raw materials (than the current
supplier) would be classified as which cost of quality category?
A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs
37) The following data relate to Whitmore Enterprises for last year:
What is the net cash provided by operating activities for last year on the statement of
cash flows for Whitmore Enterprises?
A) $132,000
B) $133,000
C) $163,000
D) $152,000
38) Hummingbird Manufacturing manufactures small parts and uses an activity-based
costing system.
The following parts were produced in October with the following information:
Total assembly fees for part B is
A) $ 2,500
B) $17,000
C) $ 3,250
D) $ 975
39) If the selling price per unit is $65, the variable expense per unit is $45, and total
fixed expenses are $250,000, what will the breakeven sales in units be?
A) 12,500
B) 5,556
C) 2,273
D) 3,846
40) The format of the income statement most useful in decision-making is which of the
following?
A) Absorption costing format
B) Traditional format
C) Contribution margin format
D) Single-step format
41) If manufacturing overhead has been underallocated during the period, then which of
the following is TRUE?
A) The jobs produced during the period have been overcosted
B) The jobs produced during the period have been costed correctly
C) The jobs produced during the period have been undercosted
D) None of the above
42) The direct materials flexible budget variance can be divided into two variancesthe
A) price variance and the rate variance
B) price variance and the standard variance
C) price variance and the quantity variance
D) quantity variance and the efficiency variance
43) All of the following items would be found in raw materials inventory for a furniture
manufacturer except
A) wood
B) fabric
C) steel framing
D) assembly worker wages
44) Selected information about The Staccato Company for the current year and prior
year is given below.
The current year’s net income percentage (as would be found on a vertical analysis of
the income statement for the current year) is
A) 11.00%
B) 11.98%
C) 32.74%
D) 132.74%
45) Company X sells widgets. The following information summarizes the company’s
operating activities for the year:
What is cost of goods sold?
A) $9,500
B) $6,000
C) $8,000
D) $13,000
46) Active Lifestyle Beverages gathered the following information for Job #928:
What is the direct materials price variance?
A) $612.50 favorable
B) $612.50 unfavorable
C) $550.00 favorable
D) $550.00 unfavorable
47) When preparing a scatter plot, how should the data be graphed?
A) Volume data on the y-axis
B) Cost data on the x-axis
C) Cost data on the y-axis
D) Volume data on the z-axis
48) The convenience store owned by a national convenience store chain is likely to be
classified as a(n)
A) cost center
B) investment center
C) revenue center
D) profit center
49) Martin Enterprises provides the following information about its single product.
What is the breakeven point in units?
A) 22,100
B) 8,710
C) 40,900
D) 4,706