1) A “perfect” straight line would render an R-square value of 1.00 .
2) Process costing is used by companies that produce large numbers of identical units of
production in a continuous fashion.
3) For purposes of the statement of cash flows, “cash” includes cash on hand, cash in
the bank and cash equivalents.
4) Manufacturing, merchandising, and service companies prepare operating expense
budgets.
5) The goal of value-engineering is to eliminate all waste in the system by making the
company’s processes as effective and efficient as possible.
6) Irrelevant factors should not be considered when making decisions.
7) The same CVP formulas that are used to perform CVP analysis for a company with a
single product can be used for any company that sells more than one product, as long as
a company uses the weighted-average contribution margin of all products, rather than
the contribution margin of a sole product.
8) Regression analysis uses only two of the historical data points for estimating a cost
equation.
9) Inventoriable product costs consist of manufacturing overhead, direct labor and
direct materials.
10) A company’s plan for purchases of property, plant, equipment, and other long-term
assets is part of the budgeted balance sheet.
11) Budgets communicate financial plans throughout the company.
12) The cost per equivalent unit must be computed for transferred-in costs, as well as
direct materials and conversions costs, in a subsequent department.
13) Trend analysis is the same thing as a vertical analysis.
14) Which of the following is the formula to compute inventory turnover?
A) Net credit sales/average inventory
B) Average net accounts receivable/one day’s sales
C) Net credit sales/average net accounts receivable
D) Cost of goods sold/average inventory
15) Dorsey Corporation Company budgeted 600 pounds of direct materials costing
$28.00 per pound to make 7,000 units of product. The company actually used 630
pounds of direct materials costing $30.00 per pound to make the 7,000 units. What is
the direct materials quantity variance?
A) $900 favorable
B) $840 favorable
C) $900 unfavorable
D) $840 unfavorable
16) The standard quantity of direct materials is calculated as
A) the budgeted quantity of units less the standard quantity of units
B) the standard quantity of input per unit times the number of units budgeted
C) the number of units actually made times the direct materials price standard
D) the standard quantity of input per unit times the number of units actually made
17) Which person is hired directly by the board of directors to manage the daily
operations of the company?
A) The CFO
B) The Treasurer
C) The COO
D) The CEO
18) The Armstrong Corporation developed a flexible budget for its production process.
Armstrong budgeted to use 16,000 pounds of direct material with a standard cost of $18
per pound to produce 12,000 units of finished product. Armstrong actually purchased
18,000 pounds and used 17,000 pounds of direct material with a cost of $21 per pound
to produce 12,000 units of finished product.
Given these results, what is Armstrong’s direct material price variance?
A) $48,000 favorable
B) $48,000 unfavorable
C) $54,000 unfavorable
D) $54,000 favorable
19) Two Brothers Moving prepared the following sales budget:
Credit collections are 25% in the month of sale, 60% in the month following the sale,
and 10% two months following the sale. The remaining 5% is expected to be
uncollectible.
What are the total cash collections in June?
A) $37,600
B) $86,800
C) $91,600
D) $96,300
20) The following information is provided by Mel Company:
The units in ending WIP inventory were 90% complete for materials and 25% complete
for conversion costs.
Required:
a. What are the total equivalent units for direct materials?
b. At the end of the year, what are the equivalent units for conversion costs?
21) Active Lifestyle Beverages gathered the following information for Job #928:
What is the direct labor efficiency variance?
A) $260 favorable
B) $260 unfavorable
C) $270 favorable
D) $270 unfavorable
22) Globe Enterprises purchased a new machine with a total cost of $30,450 and a
useful life of 6 years. The machine will produce net cash inflows of $7,250 over its
useful life and has a residual value of $2,125. What is the payback period for the new
machine?
A) 4.49 years
B) 3.91 years
C) 4.20 years
D) 3.25 years
23) The income statement for Lovely Locks is divided by its two product lines, Curling
Irons and Straighteners, as follows:
If Lovely Locks can eliminate fixed costs of $32,000 and increase the sale of Curling
Irons by 6,000 units at a selling price of $30 per unit and a contribution margin of $8
per unit, then discontinuing the Straighteners should result in which of the following?
A) Decrease in total operating income of $30,000
B) Increase in total operating income of $2,000
C) Increase in total operating income of $30,000
D) Decrease in total operating income of $2,000
24) Jack’s Toys sells kites for $20 each. Variable costs are $8 per kite. Fixed costs are
$2,400 per month. What is the contribution margin ratio for the kites?
A) 167%
B) 60%
C) 12%
D) 40%
25) A tennis ball maker gives us its data for the year:
Units in ending WIP inventory were 90% complete for materials and 60% complete for
conversion costs.
On December 31, the total cost of the units in ending WIP would be closest to
A) $ 6,239
B) $ 7,569
C) $19,320
D) $10,005
26) Torque Engine Company is considering opening a plant in China. It will cost
$3,500,000 to set up the plant and $750,000 to train employees. An additional $100,000
will be spent to build relationships with the local suppliers. The company anticipates
gross profit of $4,400,000 from this new plant. Do the benefits outweigh the costs or do
the costs outweigh the benefits, and by how much?
A) Costs outweigh benefits by $150,000
B) Benefits outweigh costs by $150,000
C) Costs outweigh benefits by $50,000
D) Benefits outweigh costs by $50,000
27) Which of the following types of companies use a capital expenditures budget?
A) Manufacturing
B) Merchandising
C) Service
D) All of the above
28) The Hanna Company uses straight-line depreciation and is considering a capital
expenditure for which the following relevant cash flow data have been estimated:
Total net inflows during the useful life of the asset are
A) $635,000
B) $535,000
C) $585,000
D) $85,000
29) Lough Company prepared the following purchases budget:
All purchases are paid for as follows: 20% two months after purchase, 55% in the
following month, and 25% in the month of purchase.
What are the cash disbursements in August for June purchases?
A) $8,000
B) $25,300
C) $22,000
D) $10,000
30) Presented are the income statements of Ritman and Taylor Publications companies
for the current year:
Which company has the better relationship percentage-wise between selling and general
expenses compared to net sales revenue?
A) Impossible to determine
B) Both have the same relationship
C) Ritman
D) Taylor
31) Siesta Manufacturing has asked you to evaluate a capital investment project. The
project will require an initial investment of $88,000. The life of the investment is 7
years with a residual value of $4,000. If the project produces net annual cash inflows of
$16,000, what is the accounting rate of return?
A) 3.90%
B) 4.55%
C) 550.00%
D) 18.18%
32) What will be the effect on the contribution margin ratio if the selling price per unit
decreases and variable cost per unit remains the same?
A) It will decrease
B) It will increase
C) It will remain the same
D) It is impossible to determine with the given information
33) Mario Company has total fixed costs of $600,000. Total fixed and variable costs are
$612,500 at a production level of 175,000 units. The fixed cost per unit at a production
level of 300,000 units is
A) $1.75
B) $2.00
C) $2.04
D) $3.50
34) Which term below best fits “a part, segment, or subunit of a company whose
manager is accountable for specified activities”?
A) Operating budget
B) Master budget
C) Sensitivity analysis
D) Responsibility center
35) On a regression analysis output generated with Excel, a regression equation’s fixed
cost component is represented by the ________.
A) x variable 1 coefficient
B) intercept coefficient
C) R-square
D) residual
36) At Onyx Incorporated, direct materials are added at the beginning of the process
and conversions costs are uniformly applied. Other details include:
What are the total equivalent units for conversion costs?
A) 130,460
B) 165,200
C) 142,600
D) 151,640
37) A company uses the indirect method to prepare the statement of cash flows. It
presents the following amounts on its financial statements.
*Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts receivable?
A) The increase of $15,000 will be subtracted from net income
B) The increase of $15,000 will be added to net income
C) The increase of $15,000 will be added to sales revenue
D) The increase of $15,000 will be subtracted from sales revenue
38) Myles Company budgeted 10,500 pounds of direct materials costing $23.50 per
pound to make 5,300 units of product. The company actually purchased 11,000 pounds
of direct materials costing $25.00 per pound to make the 5,300 units. What is the direct
materials quantity variance?
A) $12,500 favorable
B) $11,750 favorable
C) $11,750 unfavorable
D) $12,500 unfavorable
39) McEwen Company has budgeted the following credit sales during the last four
months of the year: September, $16,000; October, $22,000; November $21,000;
December, $24,000. Experience has shown that payment for the credit sales is received
as follows: 20% in the month of sale, 55% in the first month after sale, 20% in the
second month after sale, and 5% uncollectible. How much cash can McEwen Company
expect to collect in November as a result of credit sales?
A) $15,300
B) $19,500
C) $16,300
D) $19,750
40) Rent on a factory building would be considered to be a ________ cost.
A) product
B) period
C) direct
D) none of the above
41) 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 dividend yield for the current year?
A) 6.00%
B) 42.11%
C) 26.00%
D) 32.00%
42) All of the following are challenges an organization may face when implementing an
EMA system except
A) old, outdated nature of environmental management accounting
B) communication issue
C) newness of EMA
D) hidden cost
43) If a corporation shows a net loss on its income statement, which of the following is
TRUE?
A) The company will not be able to sell stock
B) The company may still have a net increase in cash
C) The company will not be able to pay dividends
D) The company may still have an increase in retained earnings
44) To find the sales revenue (sales in dollars) needed in order to breakeven or generate
a target profit, the formula used is
A) (fixed expenses + operating income) contribution margin per unit
B) (fixed expenses + operating income) contribution margin ratio
C) (fixed expenses – operating income) contribution margin ratio
D) (fixed expenses – operating income) contribution margin per unit
45) Lough Company prepared the following purchases budget:
All purchases are paid for as follows: 20% two months after purchase, 55% in the
following month, and 25% in the month of purchase.
What are the cash disbursements in October for September purchases?
A) $9,200
B) $25,300
C) $8,000
D) $184,000
46) Mountaintop golf course is planning for the coming season. Investors would like to
earn a 12% return on the company’s $45 million of assets. The company primarily
incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be
$20,000,000 for the golfing season. About 400,000 golfers are expected each year.
Variable costs are about $15 per golfer. The Mountaintop golf course is a price-taker
and won’t be able to charge more than its competitors who charge $75 per round of golf.
What profit will it earn in terms of dollars?
A) $16,000,000
B) $(4,000,000)
C) $ 4,000,000
D) $(20,000,000)
47) The SEC requires that reports generated by the managerial accounting system must
be audited by an independent certified public accountant (CPA).
48) The ________ balance sheets displays only percentages.
A) comparative
B) account form
C) report form
D) common-size
49) The effect of a plant closing on employee morale is an example of which of the
following?
A) A qualitative factor
B) A quantitative factor
C) A sunk cost
D) A variable cost
50) Bear Country Granola is considering selling premium granola. It already sells
regular for $6.75/pound and would sell premium granola for $9.50/pound. The cost for
organic grains for the premium granola would be $1.15/pound. A cost that would not be
considered in this decision would be
A) the extra revenue generated by selling premium
B) the cost of refining the regular granola
C) the cost of further processing the regular granola into premium granola
D) any of the above would be considered
51) When management uses feedback to take corrective action on the budgets, which of
the following management responsibilities are being fulfilled?
A) Controlling
B) Adjusting
C) Directing
D) Planning
52) Which of the following budgets usually shows separate sections for fixed and
variable costs?
A) Direct materials and manufacturing overhead budget
B) Manufacturing overhead budget and production budget
C) Production budget and manufacturing overhead budget
D) Operating expense budget and manufacturing overhead budget
53) Performing duties in accordance with relevant laws, regulations, and technical
standards comprise the IMA professional ethics standard of
A) credibility
B) competence
C) integrity
D) confidentiality