Increasing capital turnover is one of the advantages of implementing the JIT
philosophy.
An accounting firm is setting the audit fee for a proposed engagement. The budgeted
direct professional labor hours are 100 hours at a rate of $100 per hour. Indirect costs
are budgeted at 200% of the direct professional labor cost. Travel costs are budgeted at
$20,000. If the markup is 100% of total budgeted costs, what is the audit fee?
A) $30,000
B) $50,000
C) $100,000
D) $640,000
The ownership claim arising from funds contributed by the owners of the business is
called ________.
A) liabilities
B) retained earnings
C) note payable
D) paid-in capital
New Jersey Company is considering two investments. The relevant data follows:
Project A Project B
Cost $200,000 $300,000
Annual cash savings (end of year) $50,692 $60,995
Terminal salvage value $50,000 $70,000
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 B is approximately ________.
A) 6%
B) 7%
C) 8%
D) 10%
In an economic downturn, a company could temporarily reduce or eliminate a(n)
________.
A) property taxes on factory building
B) insurance on factory building
C) lease payments on computers in corporate headquarters
D) public relations department
A favorable variance occurs on a performance report when ________.
A) the actual cost is greater than the budgeted cost
B) the actual revenue is less than the budgeted revenue
C) the actual profit is less than the budgeted profit
D) the actual profit is greater than the budgeted profit
Presented below is the production data for six months of the year showing the mixed
costs incurred by Kennedy Company.
Month Cost Units
July $6,000 4,000
August $10,250 6,500
September $10,500 8,000
October $12,700 10,500
November $14,000 12,000
December $10,850 9,000
Kennedy Company uses the high-low method to analyze mixed costs. The total fixed
cost is ________.
A) $2,000
B) $4,500
C) $10,417
D) $10,500
If the total amount of fixed costs increases, what is the effect on the break-even point?
(Assume no other changes.)
A) The break-even point increases.
B) The break-even point decreases.
C) The break-even point remains the same.
D) The break-even point is zero.
To determine the cost of a manufactured product, a normal costing system uses
________.
A) actual direct material, actual direct labor and actual overhead costs
B) applied direct material, applied direct labor and applied overhead costs
C) applied direct material, applied direct labor and actual overhead costs
D) actual direct materials, actual direct labor and normal applied overhead costs
In an efficient capital market, searching for ________.
A) overpriced securities is fruitless
B) underpriced securities is fruitless
C) securities with high dividend yields is fruitless
D) low risk securities is fruitless
Goller Company is preparing a cash budget for the month of June. The following
information is available:
Cash Balance, May 31, 2015 $10,000
Cash collections from customers in June 66,000
Cash paid for merchandise in June 42,000
Cash paid for operating expenses in June 12,000
Purchase furniture for cash in June 3,000
Depreciation expense in June 5,000
Amortization expense in June 5,000
The minimum cash balance desired is $10,000. What is the cash balance on June 30,
2015?
A) $9,000
B) $10,000
C) $11,000
D) $19,000
John Company reported cost of goods sold of $910,000, an increase in inventory of
$100,000, and an increase in accounts payable of $40,000. How much cash was paid to
suppliers?
A) $770,000
B) $810,000
C) $970,000
D) $1,050,000
By-products differ from joint products because by-products have ________.
A) no joint costs before the split-off point
B) joint costs before the split-off point
C) significant sales value when compared to other products at the split-off point
D) insignificant sales value when compared to other products at the split-off point
Melissa Company produces and sells a product that has variable costs of $8 per unit and
fixed costs of $240,000 per year. If 20,000 units are produced and sold in a year, what is
the total cost per unit?
A) $5
B) $8
C) $12
D) $20
Purple Rain Company planned to sell 35,000 units. Actual sales were 30,000 units.
Based on this information, Blue Company was ________.
A) efficient
B) inefficient
C) effective
D) ineffective
Which of the following is a component of the financial budget?
A) budgeted balance sheet
B) budgeted income statement
C) sales budget
D) purchases budget
Which of the following variance(s) is(are) computed for fixed overhead costs?
A) production volume variance
B) flexible budget variance
C) efficiency variance
D) production volume variance and flexible budget variance
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
Levine Company will purchase a van for $40,000. It will have a depreciable life of 5
years and a terminal salvage value of $10,000. Assume a tax rate of 30% and a required
rate of return of 12%. The company uses the straight-line method of depreciation for tax
purposes. The annual cash operating savings at the end of each year, exclusive of
depreciation, are $10,000 for five years. The present value of an ordinary annuity factor
of one for 5 periods at 12% is 3.6048. The present value of one for 5 periods at 12% is
0.5674. What is the net present value of the van?
A) $(441)
B) $(2,604)
C) $1,722
D) $5,420
The following information was extracted from the accounting records of Vogel
Company:
Beginning Paid-in Capital $90,000
Beginning Retained Earnings $300,000
Beginning Assets $455,000
Contributions by Owners $0
Revenues $200,000
Expenses $155,000
At the beginning of the period, what is the total amount of liabilities?
A) $65,000
B) $100,000
C) $155,000
D) $245,000
Williams Company uses a job-order costing system and has the following data
available:
Beginning Direct Materials Inventory $26,000
Beginning Work-In-Process Inventory $64,000
Beginning Finished Goods Inventory $58,000
Direct materials purchased on account $148,000
Direct materials requisitioned $82,000
Direct labor cost incurred $130,000
Factory overhead incurred $146,000
Cost of goods completed $292,000
Cost of Goods Sold $256,000
Overhead application rate (based on direct labor cost) 125%
The journal entry to record the cost of goods completed would include a ________.
A) Credit to Finished Goods Inventory for $292,000
B) Credit to Cost of Goods Sold for $256,000
C) Debit to Work-In-Process Inventory for $256,000
D) Credit to Work-In-Process Inventory for $292,000
Machine usage in a department causes most of the overhead costs such as depreciation
expense, maintenance expense and repair expense. What is the most appropriate
cost-allocation base for applying overhead costs to products?
A) the number of machines
B) the salvage value of the machines
C) the average age of the machines
D) the number of machine hours
Which of the following types of organizations need cost accounting?
A) manufacturing firms and service organizations only
B) service organizations and nonprofit organizations only
C) manufacturing firms and nonprofit organizations only
D) all types of organizations
A new weight loss product is sold by a mail-order system. The mail-order system is an
example of the ________ function in the value chain.
A) marketing
B) production
C) customer service
D) distribution
When assigning indirect costs to a cost object, an ideal cost-allocation base measures
________.
A) the proportion of indirect costs to direct costs
B) the extent a particular cost is caused by a cost object
C) multiple cost drivers
D) the proportion of direct costs to indirect costs
If the IRR on a project is greater than the required rate of return, then the net present
value of the project is ________.
A) equal to zero
B) less than zero
C) greater than zero
D) none of the above
Christina Company will purchase a van for $40,000. It will have a depreciable life of 5
years and a terminal salvage value of $10,000. Assume a tax rate of 20% and a required
after-tax rate of return of 12%. The company uses straight-line depreciation for tax
purposes. The annual cash operating savings at the end of each year, exclusive of
depreciation, are $10,000 for five years. The present value of one for five periods at
12% is 0.5674. The present value of an ordinary annuity of one for five periods at 12%
is 3.6048. What is the net present value of the van?
A) $(5,394)
B) $(1,162)
C) $11,909
D) $17,583
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
Evermore Company has two service departments, Maintenance and Cafeteria, as well as
two production departments, Mixing and Finishing. Maintenance Department costs are
allocated based on direct labor hours and Cafeteria Department costs are allocated
based on number of employees. The following data are available:
Maintenance Cafeteria Mixing Finishing
Direct costs $7,000 $2,800 $1,200 $400
Direct labor hours 180 50 20 10
Number of employees 36 120 540 60
Assume the step-down method of allocating service departments’ costs is used. Assume
the Maintenance Department is allocated first.
Required:
A) Determine the total costs of the Mixing Department after allocating the service
departments’ costs.
B) Determine the total costs of the Finishing Department after allocating the service
departments’ costs.
Kaiman Company currently produces a key part at a total cost of $210,000. Annual
variable costs are $170,000. Of the annual fixed costs, $10,000 relate specifically to this
part. The remaining fixed costs are unavoidable.
Another manufacturer has offered to supply the part annually for $200,000. The
facilities currently used to manufacture the part could be used to manufacture a new
product with an expected contribution margin of $30,000 per year. Alternatively, the
facilities could be rented out at $60,000 per year. Given all of these alternatives, what is
Kaiman Company’s lowest net relevant cost for the parts?
A) $130,000
B) $140,000
C) $170,000
D) $180,000
A cash payment on accounts payable will ________.
A) increase assets and increase liabilities
B) increase assets and increase stockholders’ equity
C) decrease assets and decrease liabilities
D) decrease assets and increase stockholders’ equity