The methods to approximate cost functions are not ________; managers frequently use
two or more together to avoid ________ in measuring cost behavior.
A) the same; duplication
B) mutually exclusive; errors
C) complementary; errors
D) similar; duplication
Which of the following organizations oversees the CMA Exam?
A) American Institute of Certified Public Accountants
B) Chartered Accountants Institute
C) Institute of Management Accountants
D) American Institute of Certified Management Accountants
You are a management accountant in a large company. You have observed unethical
behavior by your immediate supervisor. In accordance with the guidelines offered by
the IMA, which of the following courses of action should NOT be taken?
A) Follow the organization’s established policies on the resolution of ethical conflict.
B) Discuss the issue with your immediate supervisor.
C) Consult your own attorney.
D) Initiate a confidential discussion with an IMA Ethics Counselor.
Paul Company’s expected sales for April are $27,600. Other information follows:
Budgeted Operating Expenses Amount
Wages $2,000
Advertising 1,680
Patent amortization 1,440
Rent 2,560
Marketing 5% of sales
Which of the following operating expenses is a noncash expense?
A) Advertising
B) Rent
C) Patent amortization
D) Wages
For nonprofit organizations, the stockholders’ equity section of the balance sheet is
replaced with ________.
A) retained earnings
B) partners’ capital
C) partners’ withdrawals
D) net assets
What is an example of a tool or technique that is used in a cost management system?
A) retail method
B) lower of cost or market rule
C) conservatism principle
D) cost-volume-profit analysis
Nicholson Company sold inventory costing $1,000 for $3,000 on account. Nicholson
Company operates under the accrual basis. What effect will the transaction have on the
liabilities and owners’ equity of the company?
A) liabilities will decrease by $2,000
B) liabilities will increase by $2,000
C) owners’ equity will increase by $2,000
D) owners’ equity will increase by $3,000
Dixie Company is considering the purchase of equipment for $360,000. The equipment
will have a ten year life with no terminal salvage value. Straight-line depreciation will
be used for tax purposes. It is expected that the equipment will generate annual sales of
$180,000 and annual production costs, exclusive of depreciation, of $120,000. The tax
rate is 40%. What is the net annual after-tax cash flow from the equipment?
A) $14,400 cash inflow
B) $24,000 cash inflow
C) $36,000 cash inflow
D) $50,400 cash inflow
Saludo 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 $425,000
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 unit cost for materials is
________.
A) $2.85
B) $3.20
C) $3.46
D) $3.89
Brookfield Corporation has a joint process that produces three products: X, Y and Z.
Each product may be sold at split-off or processed further and then sold.
Joint-processing costs for a year amount to $100,000. Other data follows:
Sales Value Separable Processing Sales Value
Product at Split-Off Costs after Split-Off at Completion
X $128,000 $16,000 $150,000
Y 75,000 26,000 99,000
Z 32,600 20,000 50,000
Processing Product X beyond the split-off point will cause profits to ________.
A) be unchanged
B) increase by $6,000
C) increase by $16,000
D) increase by $22,000
In a(n) ________ center, managers are responsible for costs only.
A) profit
B) cost
C) investment
D) accounting
Which of the following statements about cost accounting systems is FALSE?
A) The cost accounting system provides the cost data that managers use for decision
making.
B) The cost accounting system is the most fundamental component of a cost
management system.
C) A cost accounting system that provides accurate information is a key success factor
for all types of organizations.
D) Some types of organizations do not need cost accounting systems.
Randall Company acquired 40% of the voting stock of Boulder Company for $40
million. At the end of Year 1, Boulder Company reports net income of $15 million and
pays cash dividends of $5 million. At the end of Year 1, the market value of Randall
Company’s investment in Boulder Company is $44 million. What accounts on Randall
Company’s books would be affected by the dividends of Boulder Company?
A) none
B) Cash increase $2 million and Investment Revenue increases $2 million
C) Cash increase $5 million and Investment Revenue increases $5 million
D) Cash increase $2 million and Investments decrease $2 million
A company manufactures household furniture at several different plants. When
preparing segmented income statements for each plant, unallocated costs do NOT
include ________.
A) Salaries of attorneys at corporate office
B) Salaries of human resources staff at corporate office
C) Advertising initiated at corporate office
D) Depreciation expense on testing equipment in plant
The following data has been assembled for John Company. Use the high-low method.
Month Cost Hours
January $24,400 2,000
February $39,000 2,200
March $35,280 2,750
April $36,400 3,500
May $40,000 4,000
The expected total cost at an operating level of 1,900 hours is ________.
A) $23,180
B) $23,620
C) $24,000
D) $24,400
Marianne Company has an idle machine that originally cost $200,000. The book value
of the machine is $100,000. The company is considering three alternative uses of the
idle machine:
Alternative 1: Disposal of machine. Disposal value of machine is $50,000.
Alternative 2: Use the idle machine to increase production of Product A. Contribution
margin from additional sales of Product A is estimated to be $60,000.
Alternative 3: Use the idle machine to increase production of Product B. Contribution
margin from additional sales of Product B is estimated to be $70,000.
When considering Alternative 2, what is the opportunity cost of the idle machine?
A) $50,000
B) $60,000
C) $70,000
D) $110,000
The variable cost of Part X is $50 per unit and the full cost of the part is $80 per unit.
The part is produced in Portugal and transferred to a plant in the United States. Portugal
has a 10% income tax rate. The United States has a 50% income tax rate and an import
duty equal to 10% of the price of the item. Part X can be transferred at full cost or
variable cost. Assume Part X is transferred at full cost. By using full cost instead of
variable cost for the transfer price, the income tax effect per unit in Portugal is
________.
A) a decrease in tax by $3 per unit
B) an increase in tax by $3 per unit
C) a decrease in tax by $15 per unit
D) an increase in tax by $15 per unit
When absorption costing is used for the income statement, the difference between sales
and ________ is gross margin.
A) manufacturing cost of goods sold
B) selling expenses
C) selling and administrative expenses
D) variable expenses
On March 1, a landlord received $10,000 rent for the month of April. On March 1, the
landlord will ________.
A) increase Cash and increase Rent Revenue
B) increase Cash and increase Unearned Rent Revenue
C) increase Cash and increase Paid-in Capital
D) increase Rent Expense and decrease Cash
Managers can eliminate ________ costs entirely for a given year in dire times such as a
major recession. However, managers cannot eliminate ________ costs.
A) discretionary variable costs; committed variable costs
B) discretionary fixed costs; committed fixed costs
C) discretionary variable costs; committed fixed costs
D) committed fixed costs; committed variable costs
The cash paid for dividends is included in the ________ section of the statement of cash
flows.
A) operating
B) investing
C) financing
D) noncash
Mary Company has the following information:
Month Budgeted Purchases
January $26,800
February 29,000
March 30,520
April 29,480
May 27,680
Purchases are paid as follows:
10% in the month of purchase
50% one month after purchase
40% two months after purchase
A) $14,740
B) $17,508
C) $26,948
D) $29,716
Presented below is the production data for six months of the year showing the mixed
costs incurred by Madeline Company.
Month Cost Units
July $6,000 4,000
August $11,250 9,500
September $11,500 9,000
October $11,700 10,500
November $14,000 12,000
December $12,850 10,000
Madeline Company uses the high-low method to analyze mixed costs. The predicted
total cost at an operating level of 10,000 units is ________.
A) $11,725
B) $11,800
C) $12,000
D) $12,850
Here is a statement from the Statement of Ethical Professional Practice drafted by the
Institute of Management Accountants: “Each member has a responsibility to perform
professional duties in accordance with relevant laws, regulations and technical
standards.” This statement comes from the ________ standard.
A) credibility
B) confidentiality
C) competence
D) professional responsibility
The static budget is based on the ________ level of output and the flexible budget is
based on the ________ level of output.
A) actual; expected
B) expected; actual
C) expected; planned
D) actual; projected
Who provides assurance to external users about the reliability of a company’s financial
statements?
A) Certified Management Accountants and Certified Public Accountants
B) Chartered Management Accountants and Certified Management Accountants
C) Certified Public Accountants and Chartered Management Accountants
D) Certified Public Accountants and Chartered Accountants
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
Bronkov Company has the following data:
Month Budgeted Sales
May $46,000
June 50,000
July 52,000
August 48,000
The cost of goods sold percentage is 65% of sales and the desired ending inventory
level is 25% of next month’s sales at cost. What are the expected total purchases for
June?
A) $17,500
B) $32,500
C) $32,825
D) $40,950
For internal decision-making purposes, many companies use the income statement
using the ________ approach. For external reporting, most companies use the income
statement using the ________ approach.
A) absorption; absorption
B) absorption; contribution
C) contribution; absorption
D) full costing; variable costing
Assume sales are the cost driver for product costs. The difference between the static
budget amount for sales and the flexible budget amount for sales at the actual level of
sales is called the ________. The difference between the flexible budget amount for
sales at the actual level of sales and the actual amount for sales is called the ________.
A) static variance; flexible budget variance
B) master variance; flexible budget variance
C) quantity variance; static budget variance
D) sales activity variance; flexible budget variance
Rachel Company manufactures phones in a two-department process that involves
Assembly and Finishing. The Assembly Department reported the follow data for the
past month:
Direct materials added $336,000
Direct labor 460,800
Factory overhead 230,400
Total costs to account for $1,027,200
Units started 80,000
Units completed and transferred 67,200
Units not complete 12,800
Units in beginning inventory 0
The partially complete units at the end of the month were 100 percent complete with
respect to materials and 75 percent complete with respect to conversion costs. The
journal entry to record the units completed and transferred to the Finishing Department
includes ________.
A) Debit to Work-in-Process Inventory, Finishing for $862,848
B) Credit to Work-in-Process Inventory, Finishing for $862,848
C) Debit to Work-in-Process Inventory, Assembly for $887,040
D) Credit to Work-in-Process Inventory, Assembly for $887,040
To design a management control system that meets an organization’s needs, managers
must identify what motivates employees, ________ and ________.
A) develop performance measures based on these employee motivators; establish a
monitoring and reporting structure for the performance measures
B) develop performance measures to encourage managerial effort; establish a
monitoring and reporting structure for productivity
C) develop performance measures that meet organizational objectives; establish an
accounting system to measure productivity
D) develop performance measures based on goal congruence; establish an accounting
system to measure goal congruence
The Computer Department in a large company provides services to many departments.
The cost driver for costs in the Computer Department is the number of computer hours.
When allocating variable costs of the Computer Department to a user department,
which of the following formulas is used?
A) actual computer hours used × (total budgeted variable costs of Computer
Department / total budgeted computer hours of Computer Department)
B) budgeted computer hours to be used × (total budgeted variable costs of Computer
Department/ total budgeted computer hours of Computer Department)
C) actual computer hours used × (total actual variable costs of Computer Department/
total actual computer hours of Computer Department)
D) budgeted computer hours to be used × (total actual variable costs of Computer
Department/ total budgeted computer hours of Computer Department)
Train Company has two service departments, Maintenance and Human Resources.
Train Company also has two production departments, Mixing and Finishing.
Maintenance costs are allocated based on square footage while Human Resources costs
are allocated based on number of employees. The following information has been
gathered for the current year:
Human
Maintenance Resources Mixing Finishing
Direct costs $50,400 $33,600 $42,000 $70,000
Square footage 1,600 800 3,200 2,400
Number of employees 16 24 48 64
If the direct method is used to allocate service department costs, then the total cost of
the Human Resources Department after the Maintenance Department cost allocation
would be ________.
A) $33,600
B) $38,640
C) $39,900
D) $50,400