The limited liability of stockholders in a corporation means that ________.
A) the company’s creditors cannot seek payment from the stockholders as individuals if
the corporation cannot pay its debt
B) the company’s creditors cannot receive more than the face value of their debt
C) the short-term creditors have to be paid before the long-term creditors
D) the long-term creditors have to be paid before the short-term creditors
All of the following can be sources of benchmarks EXCEPT for ________.
A) competitors
B) organization itself
C) organizations with dissimilar processes
D) organizations with similar processes
A company has 10,000 hours of capacity and manufactures two products. Product 1
takes 2 hours per unit. Product 2 takes 3 hours per unit. The contribution margin per
unit for Product 1 is $5. The contribution margin per unit for Product 2 is $6. Neither
product has enough demand to use all of the plant capacity, but the demand for both
products exceeds the plant capacity. Which product or products should be
manufactured?
A) 5,000 units of Product 1 and 0 units of Product 2
B) 0 units of Product 1 and 5,000 units of Product 2
C) make Product 1 first until meet customer demand, then make Product 2
D) make Product 2 first until meet customer demand, then make Product 1
Which of the following is NOT a stated purpose of cost allocation?
A) Predict the economic effects of strategic and operational control decisions.
B) Obtain reimbursement.
C) Provide motivation to managers.
D) Determine product cost.
The ending retained earnings balance of Brothers Company is $700,000. During the
current year, net income is $370,000 and dividends declared are $150,000. What is the
beginning balance in retained earnings?
A) $480,000
B) $580,000
C) $800,000
D) $1,060,000
The three methods for allocating service department costs to other departments are
________.
A) step-down, indirect and reciprocal allocation
B) direct, step-up and reciprocal allocation
C) step-down, direct and reciprocal allocation
D) step-up, indirect and simultaneous equations
Fahnstock Company has the following information available for the most current year:
Paid-in capital, January 1, 2014 $475,000
Retained earnings, January 1, 2014 $100,000
Total revenues in 2014 $870,000
Total expenses in 2014 $550,000
Dividend declared in 2014 $70,000
Dividend paid in 2014 $0
Investments by owners in 2014 $10,000
What was the total amount of paid-in capital for Fahnstock Company at December 31,
2014?
A) $475,000
B) $485,000
C) $535,000
D) $835,000
When estimating a cost function, we assess reliability using ________.
A) visual inspection
B) plausible relationships
C) goodness of fit
D) intuition
When the actual volume is less than the expected volume, the production volume
variance is ________ because the usage of the facilities is ________.
A) favorable; higher than expected
B) unfavorable; lower than expected
C) favorable; lower than expected
D) unfavorable; higher than expected
In a merchandising company, ________.
A) selling and administrative costs are period costs
B) insurance expense on the corporate building is a product cost
C) Work-In-Process Inventory may be present
D) Finished Goods Inventory may be present
Sandy Company manufactures three products from a joint process. Joint costs for the
year amounted to $250,000. The following data was available:
Product Units Produced Sales Value at Split-off
X 5,000 $70,000
Y 3,000 $30,000
Z 2,000 $100,000
Assume the relative-sales-value method of allocating joint costs is used. What amount
of joint costs is allocated to Product Z?
A) $50,000
B) $100,000
C) $125,000
D) $250,000
Assume the following facts:
Sales price $180 per unit
Variable cost $100 per unit
Total fixed costs $39,600
Targeted net income $52,800
How many units must be sold to achieve the targeted net income?
A) 513
B) 629
C) 963
D) 1,155
Seavers Company paid $2,700 for 6 months’ insurance, covering the period of April 1 to
September 30. At the time of the payment, the entire amount was used to increase the
balance in the Prepaid Insurance account. The balance in the Prepaid Insurance account
on May 31 is ________.
A) $0
B) $900
C) $1,800
D) $2,250
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 Joseph Company used regression analysis to predict the annual cost of utilities. The
results were as follows:
Utilities Cost
Explained by Direct Labor Hours
Constant 2,500
Standard error of Y estimate 0.7
R-Squared 0.85
No. of observations 30
Degrees of freedom 28
X Coefficient 0.84
Standard error of coefficient 0.92
The coefficient of determination is ________.
A) 0.70
B) 0.84
C) 0.85
D) 0.92
One way to reduce negative attitudes of managers toward budgets is by ________.
A) zero-based budgeting
B) activities-based budgeting
C) long range planning
D) participative budgeting
Amounts owed to vendors for purchases on credit are called ________. Amounts due
from customers for credit sales are called ________.
A) accounts payable; notes receivable
B) notes payable; notes receivable
C) accounts payable; accounts receivable
D) debt payable; debt receivable
A company is considering two investment projects. If they use the total project
approach and the differential approach, both approaches produce ________.
A) different answers
B) similar answers
C) the same answer
D) not enough information is given to make an assessment
The best way to reconcile any conflict between capital budgeting models and
performance evaluation is to use the ________ for both capital budgeting decisions and
performance evaluation.
A) payback period model
B) accounting rate of return model
C) real options model
D) discounted cash flow model
Dakota Company has been producing and selling 42,000 hats a year. There are no
beginning and ending inventories. The Dakota Corporation has the capacity to produce
52,000 hats. The following data is available:
Selling price per unit $30
Variable manufacturing costs per unit $13
Variable selling and administrative costs per unit $7
Total fixed manufacturing costs $126,000
Total fixed selling and administrative costs $84,000
If a special order is accepted for 10,000 hats at a price of $25 per unit, net income
would ________.
A) increase by $20,000
B) increase by $50,000
C) increase by $90,000
D) decrease by $24,000
Financial reports prepared by financial accountants focus on ________. Financial
reports prepared by management accountants focus on ________.
A) segments of the organization such as departments and divisions; segments of the
organization such as departments and divisions
B) the organization as a whole; the organization as a whole
C) the organization as a whole; segments of the organization such as departments and
divisions
D) segments of the organization such as departments and divisions; the organization as
a whole
Butters Company produces 2,500 units. Each unit was expected to require 2 labor hours
at a cost of $10 per hour. Total labor cost was $52,250 for 4,750 hours worked. Direct
labor is measured in labor hours. What is the direct labor quantity variance?
A) $2,500 Favorable
B) $2,500 Unfavorable
C) $2,750 Favorable
D) $2,750 Unfavorable
Zeman Company reports the following information on December 31, 2014:
Cash $20,000
Accounts receivable 112,000
Accounts payable 91,000
Accrued wages payable 6,000
Unearned revenue 2,000
Paid-in capital 59,000
Retained earnings 80,000
Inventory 30,000
Prepaid rent 4,000
Equipment (net) 12,000
What are total liabilities at December 31, 2014?
A) $91,000
B) $97,000
C) $99,000
D) $179,000
What is the sequence of steps in preparing the master budget?
A) Output from the financial budget is used to prepare the operating budget.
B) Output from the operating budget is used to prepare the financial budget.
C) Output from the financial budget is used to prepare the budgeted income statement.
D) Output from the financial budget is used to prepare the operating expense budget.
The horizontal axis on the cost-volume-profit graph is the ________.
A) dollars of cost
B) sales volume in units
C) dollars of revenue
D) net income
A hospital radiology department has the following activities:
Activity Number Activity Description
1 Repair X-ray equipment
2 Taking X-ray with X-ray equipment
3 Wait time between patients
4 Repeating an X-ray because the X-ray technician forgot to
load the film in the X-ray equipment
Which activity is a value-added activity?
A) Activity 1
B) Activity 2
C) Activity 3
D) Activity 4
In a special order decision, which of the following costs are usually irrelevant to the
decision?
A) variable manufacturing costs
B) fixed manufacturing costs
C) variable selling costs
D) variable indirect production costs
ABC Division is in the United States with high income tax rates. ABC Division
produces a component for the Spain Division in a low income-tax-rate country. What
transfer price should ABC Division set for the component sold to the Spain Division to
minimize taxes?
A) ABC Division should set a high transfer price to maximize profits.
B) ABC Division should set a low transfer price to maximize profits.
C) ABC Division should set a high transfer price to minimize taxes.
D) ABC Division should set a low transfer price to minimize taxes.
A direct-costing income statement has a subtotal for ________ whereas an
absorption-costing income statement has a subtotal for ________.
A) gross profit; contribution margin
B) contribution margin; gross profit
C) cost of goods sold; variable cost of goods sold
D) cost of goods manufactured; variable cost of goods manufactured
Dooley Company has prepared the following sales budget:
Month Cash Sales Credit Sales
September $123,000 $210,000
October 140,000 200,000
November 167,000 260,000
December 189,000 190,000
Collections of credit sales are 50% in the month of sale, 40% in the month following
sale, and 10% two months following sale. No uncollectible accounts are expected. What
are the estimated cash collections in October from October sales?
A) $125,000
B) $140,000
C) $230,000
D) $240,000
Which of the following is an example of using cost information for operational control?
A) determination of Cost of Goods Sold for the income statement
B) identification of capital assets to acquire for expansion purposes
C) selection of value-chain function to emphasize in corporate mission
D) evaluation of process improvement efforts in a manufacturing process
The preferred guidelines for allocating service department costs to user departments
include ________.
A) combining variable-cost and fixed-cost pools
B) establishing details about cost allocation after providing services
C) using actual costs for allocation of fixed costs and variable costs
D) allocating variable-cost and fixed-cost pools separately
A budget ________.
A) is a quantitative expression of a plan of action
B) provides feedback by comparing actual results with planned results
C) includes deviations from planned results
D) ignores areas that are presumed to be running smoothly
The horizontal axis on the cost-volume-profit graph is the ________.
A) dollars of cost
B) sales volume in units
C) dollars of revenue
D) net income