1) The journal entry to record the ultimate completion of the units would include a
credit to the WIP inventory account of the last sequential production department.
2) The breakeven point on a CVP graph is the point where the sales revenue line
intersects the total expense line.
3) When selecting a capital investment project from three alternatives, the project with
the highest net present value will always be preferable.
4) Working capital is a measure of a company’s ability to pay its current obligations.
5) In process costing, the costs flow from Raw Materials Inventory, to Work in Process
Inventory, to Finished Goods Inventory.
6) Management accountants spend more time planning, analyzing and interpreting
accounting data and less time recording routine accounting transactions than they have
in the past.
7) The weighted average contribution margin will always be the same as the
contribution margin of the highest-volume product.
8) Relevant information is expected future data that will not differ among alternatives.
9) A profit center will show revenues and costs.
10) Research and development is needed to improve products and to design new
products.
11) An underallocation of manufacturing overhead is typically corrected by decreasing
cost of goods sold on the income statement.
12) Indirect manufacturing costs should be included in manufacturing overhead.
13) The payback method can be used when the net cash inflows from a capital
investment are unequal.
14) If inventory has declined, operating income will be higher under absorption costing
than it is under variable costing.
15) Assume no beginning WIP inventory. The ending WIP inventory is 30% complete
for materials. The total number of equivalents for materials would be
A) less than the units started
B) less than the units completed
C) equal to the units completed
D) equal to the units started
16) The formula for computing the rate of return on common stockholders’ equity is
A) (net income + interest expense) / average total assets
B) (net income – preferred dividends) / average common stockholders’ equity
C) net income / net sales
D) (net income – preferred dividends) / number of shares of outstanding common stock
17) Differentiate between:
A. direct materials versus indirect materials
B. direct labor versus indirect labor
18) Which type of analysis includes the computation of the percentage change in total
assets between two balance sheet dates?
A) Profitability
B) Vertical
C) Horizontal
D) Capital
19) Jean’s Fitness Club provides monthly memberships as well as personal training
sessions. The personal trainers earn 50% of the revenue for all personal training
sessions. The Fitness Club also sells nutrition products. Jean’s general ledger accounts
indicate the following for the year. The front desk staff wages expense remains the same
throughout the year.
If a contribution margin income statement is prepared for the year, what is the amount
of total revenue?
A) $280,000
B) $215,000
C) $315,000
D) $140,000
20) A company uses the indirect method to prepare the statement of cash flows, how
will a gain from the sale of equipment be presented on the statement?
A) A gain from the sale of equipment will be added to net income in the operating
activities section
B) A gain from the sale of equipment will be an addition in the financing activities
section
C) A gain from the sale of equipment will be deducted from net income in the operating
activities section
D) A gain from the sale of equipment will be an addition in the investing activities
section
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 book value per share of common stock on the last day of the
current year?
A) $4.33
B) $6.50
C) $25.00
D) $42.00
22) Country Furniture Company manufactures furniture at its Akron, Ohio, factory.
Some of its costs from the past year include:
Prime costs for Country Furniture Company totaled
A) $92,000
B) $247,500
C) $250,500
D) $368,500
23) Kahn Performance Nutrition produces a protein shake which contains whey protein
as one of its ingredients. The whey protein (materials) standards for each batch of
protein shake produced are 12 pounds of whey protein at a standard cost of $3.00 per
pound. During July, Kahn Performance Nutrition purchased and used 54,000 pounds of
whey protein at a total of $170,000 to make a total of 4,300 batches of protein shake.
What is the materials quantity variance for whey protein in July?
A) $7,200 unfavorable
B) $7,200 favorable
C) $141,900 favorable
D) $141,900 unfavorable
24) The number of defects found during the manufacturing process would be an
example of measuring which perspective?
A) Internal business
B) Customer
C) Financial
D) Learning and growth
25) Within the relevant range, which of the following statements is TRUE with respect
to fixed costs per unit?
A) They will increase as production increases
B) They will decrease as production decreases
C) They will remain the same as production levels change
D) They will increase as production decreases
26) Managers can quickly forecast the total contribution margin by dividing the
A) projected sales units by the variable cost ratio
B) projected sales units by the contribution margin ratio
C) projected sales revenue by the unit contribution margin
D) projected sales revenue by the contribution margin ratio
27) Garfield Corporation is considering building a new plant in Canada. It predicts sales
at the new plant to be 50,000 units at $5.00/unit. Below is a listing of estimated
expenses:
A Canadian firm was contracted to sell the product and will receive a commission of
10% of the sales price. No U.S. home office expenses will be allocated to the new
facility.
The unit variable cost for Garfield Corporation is
A) $4.50
B) $3.10
C) $3.60
D) $1.40
28) Only the ________ section differs in a statement of cash flows using the direct
method rather than the indirect method.
A) operating activities
B) financing activities
C) investing activities
D) none of the above
29) The following data pertain to costs at Summit Company:
The variable cost per unit is
A) $ 3.75
B) $15.00
C) $18.75
D) $11.25
30) Rustic Living Furniture Company manufactures furniture at its central Kentucky
factory. Some of its costs from the past year include:
Conversion costs for Rustic Living Furniture Company totaled
A) $126,000
B) $175,000
C) $294,000
D) $271,500
31) Which of the following does activity-based costing consider to be the fundamental
cost object?
A) Direct labor hours
B) Activities
C) Direct materials
D) Finished goods
32) Selected financial information for Brookeville Manufacturing is presented in the
following table (000s omitted).
What was direct materials used?
A) $600
B) $380
C) $420
D) $400
33) Deco Corporation uses a job costing system. On January 1, Deco Corporation’s
work in process inventory account had a balance of $75,000. During the year, materials
requisitioned for use in production amounted to $120,000, of which $82,000
represented direct materials. Factory wages for the period were $231,000, of which
$219,000 were for direct labor. Manufacturing overhead is allocated on the basis of
85% of direct labor cost. Actual overhead cost for the year was $125,000. Jobs costing
$345,000 were completed during the year.
The December 31 work in process inventory balance is
A) $426,000
B) $217,150
C) $156,000
D) $168,000
34) Stanley’s Bicycles store buys bicycles on average for $600 and sells them on
average for $750. He pays a sales commission of 15% of sales revenue to his sales staff.
Stanley pays $1,400 a month rent for his store, and also pays $3,000 a month to his staff
in addition to the commissions. Stanley sold 120 bicycles in June. If Stanley prepares a
contribution margin income statement for the month of June, what would be his
operating income?
A) $8,900
B) $90,000
C) $85,500
D) $100
35) An example of a fixed cost for a manufacturer would be which of the following?
A) Sales commissions
B) Salary of plant manager
C) Direct materials
D) Delivery costs
36) Which of the following items would appear first on a production cost report?
A) Total costs accounted for
B) Cost of goods finished for the month
C) Total equivalent units
D) Beginning WIP, if any
37) (Present value tables are required.) Currence Corporation is considering the
purchase of a special blow-molding machine that would cost $59,752 and would have a
useful life of 8 years. The machine would generate $11,200 of net annual cash inflows
per year for each of the 8 years of its life. The internal rate of return on the machine
would be closest to
A) 8%
B) 10%
C) 12%
D) 14%
38) The eight wastes of traditional operations includes all of the following except
A) defects
B) overproduction
C) waiting
D) utilizing people to their full potential
39) The following information relates to Truman Unlimited for the past two years.
The acid-test ratio for the current year is
A) 0.85
B) 0.57
C) 1.12
D) 2.00
40) Lucky Cow Dairy provided the following expense information for May:
What is the total cost of research and development?
A) $73,000
B) $70,000
C) $55,000
D) $195,000
41) A ________ is a source document for tracking employee hours.
A) labor time record
B) process costing
C) job cost record
D) job costing
42) The cost of lighting the factory would be classified as ________ when determining
the cost of a manufactured product.
A) an indirect cost
B) a direct cost
C) a period cost
D) none of the above
43) Which of the following statements is correct concerning product costs?
A) Product costs are expensed in the period the related product is sold
B) Product costs are expensed in the period incurred
C) Product costs are shown with operating expenses on the income statement
D) Product costs are shown with current liabilities on the balance sheet
44) A pizza company produces frozen pizzas in three departments: assembly, freezing,
and packaging. In assembly, crust ingredients are added at the beginning of the process.
After the crust is made, the sauce, cheese, and toppings are added at the end of the
process. Conversion costs are added evenly. Data for the assembly department includes:
The cost per equivalent unit for cheese, sauce, and toppings would be closest to
A) $1.20
B) $1.01
C) $1.30
D) $1.00
45) The IMA issues which of the following certifications?
A) CMA
B) CIA
C) CFP
D) CPA
46) Electric Jet Skis operates a jet ski rental business. Assume the jet skis rent for $55
per 6 hours. The variable costs are $33 per 6 hours rental, and its fixed costs are
$80,000 each month. What is the contribution margin ratio?
A) 40%
B) 60%
C) 250%
D) 22%
47) What is an attribute of the internal rate of return?
A) It is the interest rate that makes the NPV of the investment equal to zero
B) It is the interest rate that makes the cost of the investment equal to the present value
of the investment’s net cash inflows
C) It is used in the capital rationing process
D) All of the above are attributes of the internal rate of return
48) ________ are a company’s decision makers.
A) Shareholders
B) Managers
C) Customers
D) Creditors
49) Tom’s Taxidermy has a monthly target operating income of $25,000. Variable
expenses are 75% of sales and monthly fixed expenses are $15,000. What is Tom’s
operating leverage factor at the target level of operating income?
A) 0.40
B) 0.63
C) 1.60
D) 2.67
50) The following information relates to Truman Unlimited for the past two years.
Days’ sales in receivables for the current year is closest to
A) 61.85 days
B) 50.83 days
C) 79.50 days
D) 9.60 days
51) All of the following are cash inflows from a financing activity except
A) additional owner investment
B) issuance of stock
C) mortgage proceeds
D) interest revenue on loans
52) What will happen to return on investment (ROI) if current assets decrease while
everything else remains the same?
A) ROI will decrease
B) ROI will increase
C) ROI will not be affected
D) We cannot determine the direction of the effect from the information provided
53) Which of the following is not part of the operating budget?
A) Inventory, purchases and cost of goods sold budget
B) Cash budget
C) Sales budget
D) Budgeted income statement
54) Customer satisfaction ratings would be an example of the
A) customer perspective
B) financial perspective
C) internal business perspective
D) learning and growth perspective
55) Match the term on the right with the appropriate definition provided on the right.
56) Green Pastures golf course is planning for the coming season. Investors would like
to earn a 12% return on the company’s $40 million of assets. The company primarily
incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $20
million for the golfing season. About 500,000 golfers are expected each year. Variable
costs are about $12 per golfer. Green Pastures golf course is a price-taker and won’t be
able to charge more than $60 per round because of local competition.
What will Green Pasture’s revenue be at a market price of $60/round?
57) Define the term constraints and give an example. What product should be made first
when resource constraints exist?
58) The Braveheart Corporation uses departmental overhead rates to allocate its
manufacturing overhead to jobs. The company has two departments: cutting and
painting. The Cutting Department uses a departmental overhead rate of $12 per
machine hour, while the Painting Department uses a departmental overhead rate of $17
per direct labor hour. Job 422 used the following direct labor hours and machine hours
in the two departments:
The cost for direct labor is $20 per direct labor hour and the cost of the direct materials
used by Job 422 is $800.
Required: What was the total cost of Job 422 if the Braveheart Corporation used the
departmental overhead rates to allocate manufacturing overhead?
59) Sally Scooters manufactures and sells scooters. Each scooter requires two rear view
mirrors. For September, Sally Scooters has budgeted sales of 415 scooters, while 450
scooters are scheduled to be produced. Sally Scooters will begin September with 220
rear view mirrors in its beginning inventory. How many rear view wheels should Sally
Scooters purchase for September?
60) Use the indirect method of preparing a statement of cash flows to answer the
question.
Ending balances for Sunday Hut are listed below:
Net income for this year was $97,000 and dividends of $24,000 were declared and paid
this year.
What was the net cash provided by financing activities?
61) Green Pastures golf course is planning for the coming season. Investors would like
to earn a 12% return on the company’s $40 million of assets. The company primarily
incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $20
million for the golfing season. About 500,000 golfers are expected each year. Variable
costs are about $12 per golfer. Green Pastures golf course is a price-taker and won’t be
able to charge more than $60 per round because of local competition.
What will Green Pasture’s expected profit shortfall be if it charges $60/round?