The following information is available for Arnett Company:
Current assets $100,000 Current liabilities $75,000
Property, plant and Long-term liabilities 100,000
equipment 150,000 Stockholders’ equity 125,000
Other assets 50,000 Total liabilities and
Total assets $300,000 stockholders’ equity $300,000
Invested capital is defined as total assets. Net operating income is $60,000. What is
ROI?
A) 20%
B) 30%
C) 50%
D) 120%
Due to the economic downturn, a company has reduced charitable donations to
community groups. This is an example of a ________.
A) variable cost
B) committed fixed cost
C) capacity cost
D) discretionary fixed cost
The following data is available for Everest Company:
Credit Sales $1,702
Net Income $112
Total Current Assets $366
Total Current Liabilities $226
Accounts Receivable, current year $160
Accounts Receivable, prior year $156
Total Stockholders’ Equity, current year $550
Total Stockholders’ Equity, prior year $500
Retained Earnings, current year $366
Retained Earnings, prior year $346
Market price per share $50
Average Number of Common Shares Outstanding during year 46
Required:
Compute the following ratios:
A) current ratio
B) average collection period in days
C) return on stockholders’ equity
D) price-earnings ratio
E) dividend yield
Factory overhead does NOT include ________.
A) electricity bill in factory
B) insurance Expense on factory building
C) supplies used in factory
D) wages of janitors in corporate headquarters
What is the sequence of steps(order of preparation) for the financial budget?
A) sales budget, capital budget, cash budget, budgeted income statement
B) sales budget, operating expense budget, purchases and cost of goods sold budget
C) capital budget, cash budget, budgeted balance sheet
D) disbursements for purchases, disbursements for operating expenses, cash budget
Garcia Company has no beginning and ending inventories, and reports the following
data about its only product:
Direct materials used $270,000
Direct labor $180,000
Fixed indirect manufacturing $130,000
Fixed selling and administrative $150,000
Variable indirect manufacturing $120,000
Variable selling and administrative $60,000
Selling price(per unit) $99
Units produced and sold 30,000
Garcia Company uses the absorption approach to prepare the income statement. What is
the operating income?
A) $2,060,000
B) $2,120,000
C) $2,240,000
D) $2,970,000
Which of the following items below does NOT require an explicit adjustment for
inflation?
A) future operating cash flows
B) future disposal value of a long-term asset
C) future tax deductions for depreciation
D) future overhaul cost for equipment
________ costs involve efforts to improve product design for more efficient production
processes.
A) Prevention
B) Appraisal
C) Internal failure
D) External failure
If the flexible budget variance was $6,000 Favorable and the sales activity variance was
$3,000 Favorable, then the static budget variance was ________.
A) $3,000 Favorable
B) $3,000 Unfavorable
C) $9,000 Favorable
D) $9,000 Unfavorable
In order to estimate cost functions using account analysis, users rely on the ________
for information about cost behavior.
A) management audit
B) performance report
C) value chain
D) accounting system
During the month of May, Gonzalez Clothing transferred 140,000 shirts to Finished
Goods Inventory. There was no beginning work-in-process inventory. The company had
30,000 shirts in process at May 31 and the shirts were 50 percent complete with respect
to conversion costs. All direct materials are added at the beginning of the production
process. How many shirts were started during May?
A) 30,000
B) 110,000
C) 140,000
D) 170,000
A company uses job-order costing. At the end of the year, applied factory overhead
costs were $10,000 and actual factory overhead costs were $12,000. The company uses
the immediate write-off method to dispose of variances. Which of the following journal
entries is necessary under the immediate write-off method?
A) Factory Department Overhead Control $2,000
Cost of Goods Sold $2,000
B) Factory Department Overhead Control $2,000
Finished Goods Inventory $2,000
C) Cost of Goods Sold $2,000
Factory Department Overhead Applied $2,000
D) Cost of Goods Sold $2,000
Factory Department Overhead Control $2,000
An entity’s economic obligations to nonowners are called ________.
A) owners’ equity
B) liabilities
C) assets
D) retained earnings
Why do managers assign the direct costs of service departments to customers instead of
the producing department?
A) for ease of calculation
B) to reduce bookkeeping costs
C) to prevent cost distortions due to the use of a cost allocation base by the producing
department that has little relationship to the cause of customer service costs
D) because customers are the only cost objects with direct costs
It is December 31, 2014. A Note Payable is due in five annual installments beginning on
December 31, 2015. On the balance sheet dated December 31, 2014, the Note Payable
is classified as ________.
A) current liability only
B) long-term liability only
C) current and long-term liability
D) owners’ equity
Sloth Company reports the following information for the last year of operations:
Actual fixed overhead costs(7,000 units) $77,000
Budgeted fixed overhead costs(10,000 units) 80,000
Planned level of operations(in units) 10,000
Actual level of operations(in units) 7,000
What is the fixed overhead spending variance?
A) $3,000 Favorable
B) $21,000 Unfavorable
C) $24,000 Unfavorable
D) $30,000 Favorable
Pennsylvania Company is considering two investments. The relevant data follows:
Project A Project B
Cost $205,010 $259,770
Annual cash savings (end of year) $50,000 $60,000
Terminal salvage value $0 $0
Estimated useful life in years 5 5
Minimum desired rate of return 10% 10%
Method of depreciation Straight-line Straight-line
Present Value Present Value
Of $1 of Ordinary
for 5 periods Annuity of $1
for 5 periods
5% 0.7835 4.3295
6% 0.7473 4.2124
7% 0.713 4.1002
8% 0.6806 3.9927
10% 0.6209 3.7908
12% 0.5674 3.6048
14% 0.5194 3.4331
Ignoring taxes, the internal rate of return for Project A is approximately ________.
A) 6%
B) 7%
C) 8%
D) 10%
In imperfect competition, firms should produce and sell units until the ________ equals
the ________.
A) average revenue; marginal cost
B) marginal revenue; average revenue
C) average revenue; average cost
D) marginal revenue; marginal cost
The cash paid for employees’ wages is included in the ________ section of the
statement of cash flows. Assume the direct method is used.
A) operating
B) financing
C) investing
D) noncash
The main sections of the balance sheet include ________.
A) revenues, assets and liabilities
B) assets, liabilities and expenses
C) expenses, revenues and stockholders’ equity
D) assets, liabilities and stockholders’ equity
Benville 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 surgery recovery floor is
________.
A) $42.00
B) $45.75
C) $75.00
D) $80.00
________ costs provide evidence about a manager’s performance. ________ costs do
not provide evidence about a manager’s performance.
A) Allocated; unallocated
B) Controllable; uncontrollable
C) Uncontrollable; controllable
D) Allocated; third party
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
The following information is available for the Gold Company:
Net income for the year ended December 31, 2014 $127.4
Retained earnings, December 31, 2014 150.0
Retained earnings, December 31, 2013 180.0
Total assets, December 31, 2014 470.0
Total assets, December 31, 2013 442.0
Total liabilities, December 31, 2014 240.0
Total liabilities, December 31, 2013 182.0
What is the return on stockholders’ equity for the year ended December 31, 2014?
A) 24.1%
B) 27.1%
C) 52.0%
D) 55.4%
________ is the excess of sales over the cost of goods sold.
A) Gross margin
B) Contribution-margin ratio
C) Variable-cost ratio
D) Contribution margin
The static budget variance is the difference between the ________ and the ________.
A) amounts for the flexible budget; amounts for the static budget
B) flexible budget variance; activity level variance
C) actual results; amounts for the static budget
D) actual results; amounts for the flexible budget
Arkansas Company has no beginning and ending inventories, and has obtained the
following data for its only product:
Selling price per unit $65
Direct materials used $150,000
Direct labor $225,000
Variable factory overhead $140,000
Variable selling and administrative expenses $60,000
Fixed factory overhead $370,000
Fixed selling and administrative expenses $30,000
Units produced and sold 20,000
Assume there is excess capacity. There is a special order outstanding for 1,000 units at
$40.00 per unit. If Arkansas Company accepts the special order, net income would
________.
A) increase by $40,000
B) increase by $11,250
C) decrease by $28,750
D) decrease by $10,000
Managers may ________ their budgeted costs or ________ their budgeted revenue to
create a budget target that is easier to achieve.
A) understate; overstate
B) overstate; understate
C) understate; understate
D) overstate; overstate
In a merchandising firm, the computation of Cost of Goods Sold does NOT use
________.
A) Merchandise Inventory, beginning balance
B) Merchandise Inventory, ending balance
C) purchases of raw materials
D) purchases of merchandise inventory
Matthew Company has a sales budget for next month of $400,000. Cost of goods sold is
expected to be 40% of sales. All units are paid for in the month following purchase. The
beginning inventory is $5,000 and an ending inventory of $12,000 is desired. Beginning
accounts payable is $76,000. The cost of goods sold for next month is ________.
A) $140,000
B) $160,000
C) $172,000
D) $220,000
Wininger Incorporated reported the following information about the production and sale
of its only product during the first month of operations:
Selling price per unit $300
Sales $480,000
Direct materials used $220,000
Direct labor $200,000
Variable factory overhead $60,000
Fixed factory overhead $80,000
Variable selling and administrative expenses $20,000
Fixed selling and administrative expenses $10,000
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 400 units
Under variable costing, the product cost per unit is ________.
A) $160
B) $170
C) $200
D) $240