What is the final step in the four-step process to allocate indirect costs to cost objects?
A) Accumulate indirect costs for a period of time in a cost pool.
B) Select an allocation base for each cost pool.
C) Multiply the percentage of total cost-allocation units used for each cost object by the
total costs in the cost pool to determine the cost allocated to each cost object.
D) Measure the units of the cost-allocation base used for each cost object and compute
the total units used for all cost objects.
Johnson Company’s power plant provides electricity to two producing departments. The
annual budget for the power plant shows the following:
Budgeted fixed costs $500,000
Budgeted variable costs per kilowatt hour $1
Actual annual costs incurred by the power plant were:
Actual fixed costs $215,000
Actual variable costs $350,000
Additional annual data follows:
Producing Department 1 Producing Department 2
Capacity available 250,000 kilowatt hours 150,000 kilowatt hours
Capacity used 270,000 kilowatt hours 165,000 kilowatt hours
Required:
A) Compute the amount of fixed costs allocated to each producing department.
B) Compute the amount of variable costs allocated to each producing department.
Activity-based costing systems should be adopted when ________.
A) indirect costs represent a small proportion of a product’s total costs
B) indirect costs represent a large proportion of a product’s total costs
C) a company makes one simple product
D) a company has a simple manufacturing process
The activity-based budgeting system emphasizes ________.
A) the resources needed by a company
B) the preparation of budgets by function
C) the attainment of long-range goals
D) activities and their consumption of resources
Cornell Company is preparing a cash budget for the month of June. The following
information is available:
Cash Balance, May 31, 2014 $11,000
Cash collections from customers in June 43,000
Cash paid for land in June 10,000
Patent amortization expense in June 5,000
Cash paid for merchandise in June 20,000
Cash paid for operating expenses in June 20,000
Cash dividend paid in June 5,000
The minimum cash balance desired is $5,000. What is the deficiency of cash before
financing at June 30, 2014?
A) $(5,000)
B) $(6,000)
C) $(11,000)
D) $(12,000)
A company has identified the appropriate cost driver for a resource cost. To estimate or
approximate the cost function, the company manager has a broad selection of methods
that will NOT include ________.
A) least squares regression analysis
B) activity analysis
C) high-low method
D) engineering method
When calculating diluted earnings per share, which of the following items is NOT
considered?
A) number of common shares outstanding
B) additional common shares from conversion of convertible securities
C) additional common shares from exercise of stock options
D) number of common shares authorized to be issued
Backflush costing provides reasonably accurate product costs if materials inventories
are ________.
A) high and production cycle times are short
B) high and production cycle times are long
C) low and production cycle times are short
D) low and production cycle times are long
An investor holds 1% of the outstanding stock of an investee. The investor plans to hold
the stock for a long time. The investor reports the dividends received from the stock as
________.
A) an increase in the investment account
B) a decrease in the investment account
C) dividend revenue on the income statement
D) equity in earnings of the investee on the income statement
In the short run, when managers set prices for products, the minimum selling price
should be equal to ________.
A) all variable costs of producing, selling and distributing the good or service
B) all fixed costs of producing, selling and distributing the good or service
C) all fixed and variable costs of producing, selling, and distributing the good or service
D) all manufacturing costs
A multiple step income statement has several measures of profit that do NOT include
________.
A) operating income
B) gross margin
C) income before taxes
D) cost of sales
Companies may be forced to use engineering analysis or account analysis to estimate
cost functions because ________.
A) engineering analysis is the least costly method
B) historical data are too subjective
C) the other estimation methods are too difficult to use
D) historical data are not available
Salmon Company manufactures greeting cards. Special glittery material is added at the
end of the process in the Printing Department. Conversion costs are applied uniformly
throughout the process. The weighted-average method of process costing is used. Data
for the Printing Department for the month of September follow:
Work-In-Process Inventory, September 1:
Units 22,500
Direct materials (0% complete) $0
Conversion costs (30% complete) $20,472
Units started in September 127,500
Units completed in September 123,000
Work-In-Process Inventory, September 30 27,000
Direct materials added in September $427,500
Conversion costs added in September $315,000
With regard to the Work-In-Process Inventory on September 30, materials are 0 percent
complete and conversion costs are 60 percent complete. The total cost of the ending
Work-In-Process Inventory is ________.
A) $39,042
B) $90,720
C) $128,520
D) $151,200
The fixed costs required to achieve a desired level of production or to provide a desired
level of service, while maintaining product or service attributes, are ________.
A) discretionary fixed costs
B) committed fixed costs
C) capacity costs
D) step costs
The schedule of cash disbursements for purchases uses the ________.
A) sales budget
B) operating expense budget
C) schedule of cash disbursements for operating expenses
D) purchases and cost of goods sold budget
In a corporation, stockholders’ equity has two parts called ________ and ________.
A) dividends; net profit
B) paid in capital; dividends
C) net profit; retained earnings
D) paid-in capital; retained earnings
In an economic downturn, a company could temporarily reduce or eliminate a(n)
________.
A) lease payment
B) salaries of key personnel
C) employee training program
D) insurance on corporate offices
Cash collected from customers before goods are delivered will increase ________.
A) assets and increase revenues
B) revenues and decrease liabilities
C) liabilities and increase assets
D) liabilities and decrease revenues
Which of the following statements is FALSE?
A) The expected variable overhead costs per unit used in the flexible budget are equal
to the variable overhead costs per unit used in product costing.
B) If the actual volume of production equals the expected volume of production, the
variable overhead costs per unit are the same for product costing and budgeting.
C) If the actual volume of production exceeds the expected volume of production, the
variable overhead costs per unit are different for product costing and budgeting.
D) If the actual volume of production exceeds the expected volume of production, the
variable overhead costs per unit are the same for product costing and budgeting.
Which of the following budgets identifies the overall goals and objectives of the
organization?
A) capital budget
B) cash budget
C) master budget
D) strategic plan
Woods Company is considering the purchase of some equipment. The initial investment
will be $100,000. The estimated useful life of the equipment will be 5 years, at which
point it will have a zero terminal salvage value. The annual savings in cash operating
costs at the end of each year, for five years, is $29,000. The company has a minimum
desired rate of return of 12%. The company uses straight-line depreciation for financial
reporting. Ignore income taxes. The cash operating savings of $29,000 do not include
depreciation expense.
Given:
The present value of ordinary annuity of one at 12% and 5 periods is 3.6048.
The present value of one at 12% and 5 periods is 0.5674.
Required:
Compute:
A) Net present value
B) Payback period
C) Accounting rate of return using the average investment
A plant asset of $270,000 is expected to generate $180,000 in operating cash savings
(excluding depreciation expense) annually for three years. Assume straight-line
depreciation is used. The useful life is three years. The asset has no expected residual
value. Ignore income taxes. The accounting rate of return based on the average
investment is ________.
A) 11.11%
B) 33.33%
C) 44.44%
D) 66.67%
The following information was extracted from the accounting records of Yamaguchi
Company:
Paid-in Capital, December 31, 2014 $87,000
Retained Earnings, December 31, 2014 $211,000
Total Assets, December 31, 2014 $455,000
Revenues for year ended December 31, 2015 $200,000
Expenses for year ended December 31, 2015 $165,000
Total Assets, December 31, 2015 $605,000
Additional investments by owners in 2015 $10,000
At December 31, 2014, what is the total amount of liabilities?
A) $45,000
B) $150,000
C) $157,000
D) $272,000
All of the following are disadvantages of decentralization EXCEPT for ________.
A) Local managers make decisions that are not in the organization’s best interests.
B) Managers spend time negotiating transfer prices for goods and services transferred
between divisions and segments.
C) Local managers duplicate services.
D) Local managers have more authority and greater levels of job satisfaction.
A favorable production volume variance indicates ________.
A) an effective use of manufacturing capacity
B) an ineffective use of manufacturing capacity
C) that the use of manufacturing capacity is lower than expected
D) that the use of manufacturing capacity is higher than expected
Elements of the planning and control process for a management control system do NOT
include ________.
A) measure, monitor and report
B) plan and execute
C) evaluate and reward
D) feedback and control
The company that owns 100 percent of another company’s stock is called the ________.
The company that is controlled by another company is called the ________.
A) majority interest; minority interest
B) controlling interest; noncontrolling interest
C) parent; subsidiary
D) subsidiary; segment
Leasehold Improvements do NOT include ________.
A) painting and decorating of leased property
B) security systems added to leased property
C) bookcases built into walls of leased property
D) furniture used at leased property
Depreciation Expense on the Heating and Air Conditioning Equipment for the factory
of $50,000 is allocated to five departments. The cost-allocation base for this expense is
the number of cubic feet, which equals 100,000 cubic feet. Information for five
departments is below:
Department Square Feet Cubic Feet
Department A 15,000 15,000
Department B 5,000 5,000
Department C 30,000 20,000
Department D 20,000 35,000
Department E 10,000 25,000
How much Depreciation Expense is allocated to Department A?
A) $2,500
B) $7,500
C) $15,000
D) $18,750
Assume the sales price is $100 per unit and the total fixed costs are $75,000. The
break-even volume in dollar sales is $250,000. What is the variable cost per unit?
A) $30
B) $70
C) $100
D) $125
Williams Company manufactures tape dispensers. The Assembly Department reported
the follow data for the past month:
Units started and completed 70,000
Units started and not complete 10,000
Units in beginning inventory 0
Direct materials costs $480,000
Conversion costs $240,000
The partially complete units at the end of the month were 100 percent complete with
respect to materials and 40 percent complete with respect to conversion costs. The unit
cost of conversion costs is ________.
A) $3.00
B) $3.24
C) $3.42
D) $24.00
________ would appear on an income statement of both a retailer and a manufacturer.
A) Direct materials used
B) Ending balance in Finished Goods Inventory
C) Selling expenses
D) Ending balance in Merchandise Inventory
On January 1, 2015, Arizona Company acquired a machine for $33,000. Annual
depreciation expense equals $3,000. The residual value of the machine is $3,000. What
is the book value of the machine on December 31, 2016?
A) $3,000
B) $27,000
C) $30,000
D) $33,000
Use of ________ in evaluating capital investment projects will promote goal
congruence and lead to better decisions than using ________.
A) return on investment; economic profit
B) economic profit; contribution by segment
C) contribution controllable by division manager; contribution by segment
D) economic profit, return on investment
If a department in a department store is under consideration to be eliminated,
unavoidable fixed expenses are ________ to the decision.
A) incremental
B) marginal
C) relevant
D) irrelevant