Murphy Company produces dolls. Each doll sells for $20.00. Variable costs per unit are
$14.00 and total fixed costs for the period are $435,000. What is the break-even point in
units?
A) 21,750
B) 31,071
C) 51,176
D) 72,500
Janitors clean the factory at the end of each workday. The wages of the janitors are used
to determine the cost of the only manufactured product in the factory. What is a good
cost driver for the wages of the janitors?
A) number of janitors
B) number of kilowatt hours used
C) number of machine hours on cleaning machines
D) number of labor hours worked by janitors
Which of the following statements about long-range plans is FALSE?
A) Long-range plans provide forecasted financial statements for five to ten year
periods.
B) Long-range plans guide day-to-day operations.
C) Companies coordinate long-range plans with capital budgets.
D) A decision made during long-range planning is the acquisition of a plant building.
I want to know where a company stands financially at December 31, 2014. Which
financial statement should I use?
A) statement of cash flows
B) statement of stockholders’ equity
C) statement of retained earnings
D) balance sheet
The following information was compiled by Gidget Incorporated:
Expected volume of production 50,000 units
Actual volume of production 47,000 units
Budgeted fixed overhead costs(for 50,000 budgeted units) $200,000
Actual fixed overhead costs $220,000
Actual variable overhead costs $790,000
Budgeted variable overhead costs(for 50,000 budgeted units) $855,000
Assume the cost-allocation base for overhead costs is units of production. What is the
production volume variance?
A) $6,000 Unfavorable
B) $12,000 Unfavorable
C) $20,000 Favorable
D) $20,000 Unfavorable
Why is absorption costing more widely used than variable costing?
A) Variable costing is not allowed for tax purposes, but absorption costing is allowed.
B) Variable costing is not allowed for external reports, but absorption costing is
allowed.
C) Absorption costing removes the impact of changing inventory levels from the
financial results.
D) A and B
Convertible bonds allow a bondholder to exchange ________.
A) unsecured bonds for secured bonds
B) unsubordinated bonds for subordinated bonds
C) common stock for bonds
D) bonds for mortgage bonds
The Tulip Company makes mugs for which the following standards have been
developed:
Standard Inputs Expected Standard Price Expected
For Each Unit of Output Per Unit of Input
Direct Materials 5 ounces $2 per ounce
Direct Labor 2.5 hours $8 per hour
Production of 400 mugs was expected in August, but 440 mugs were actually
completed. Direct materials purchased and used were 2,100 ounces at an actual price of
$2.20 per ounce. Direct labor cost for the month was $5,310, and the actual pay per
hour was $9.00. What is the direct labor price variance for August?
A) $420 Favorable
B) $420 Unfavorable
C) $590 Favorable
D) $590 Unfavorable
A(n) ________ starts with the assumption that current activities in a company will not
automatically continue in the next period.
A) activity-based budget
B) strategic budget
C) master budget
D) zero-base budget
Woodridge Corporation has a joint process that produces three products: P, G and A.
Each product may be sold at split-off or processed further and then sold.
Joint-processing costs for a year amount to $25,000. The production level for each
product is 1,000 units. Other data follows:
Sales Value Separable Processing Sales Value
Product at Split-Off Costs after Split-Off at Completion
P $12 $9 $21
G 10 4 17
A 15 6 19
Assume Woodridge Corporation processes the joint products beyond the split-off point
that will maximize net income. Woodridge Corporation’s net income is ________.
A) $12,000
B) $15,000
C) $17,000
D) $25,000
Bertinoli’s Company makes gadgets. The company uses process costing. All direct
materials are introduced at the end of the process. Conversion costs are incurred evenly
throughout the process. In February, there was no beginning Work-in-Process Inventory,
but 490,000 units were started. At the end of February, there were 90,000 units still in
process at the 70% level of completion. Total costs incurred during February were
$1,212,500 for materials and $3,664,000 for conversion costs.
Required:
A) Compute the number of units completed and transferred.
B) Compute the equivalent units for materials and conversion costs.
C) Compute the cost per equivalent unit for materials and conversion costs. Round to
two decimal places.
D) Compute the cost of the units completed and transferred.
E) Compute the cost of ending work-in-process inventory.
The debt-to-equity ratio is used to judge a company’s ________.
A) return on investment
B) liquidity
C) risk of insolvency
D) marketability
What is lean manufacturing?
A) eliminating the time products spend in activities that do not add value
B) reducing the time products spend in the production process
C) reducing the amount of inventories by ordering raw materials only when needed and
making products only when ordered by customers
D) continuous process improvements to eliminate waste from the entire enterprise
A parent company purchases 100 percent of the outstanding common stock in a
subsidiary. What happens to the subsidiary the day after the purchase? Which of the
following statements is FALSE?
A) The purchase by the parent company does not affect the subsidiary’s books.
B) The subsidiary ceases to exist.
C) The subsidiary continues as a separate legal entity.
D) The subsidiary has its own set of books.
Beck Company has determined the following variances at the end of the current year:
Variances
Production Volume Variance $100,000 Favorable
Flexible Budget Variance for Direct Materials $10,000 Unfavorable
Flexible Budget Variance for Direct Labor $22,000 Unfavorable
Flexible Budget Variance for Fixed Overhead $30,000 Favorable
Flexible Budget Variance for Variable Overhead $25,000 Unfavorable
Before consideration of the above variances, the company has operating income of
$1,400,000. What is the operating income after considering the above variances?
A) $1,343,000
B) $1,473,000
C) $1,500,000
D) $1,530,000
Brad Company planned to produce 12,000 units. This level of production required 20
setups at a cost of $18,000 plus $500 per setup. Actual production was 10,000 units,
requiring 15 setups. Actual setup cost was $26,000. What is the static budget variance
for setup costs?
A) $2,000 Favorable
B) $2,000 Unfavorable
C) $2,500 Favorable
D) $2,500 Unfavorable
The Institute of Management Accountants has adopted a set of standards for ethical
conduct which includes ________.
A) competence, integrity, confidentiality and objectivity
B) competence, confidentiality, credibility and objectivity
C) competence, confidentiality, credibility and integrity
D) competence, integrity, morality and confidentiality
Keller Company has the following income statement for the year ending December 31,
2016:
Sales $1,562
Cost of goods sold 806
Gross profit 756
Operating expenses:
Wage expense 160
Depreciation expense 16
Rent expense 106
Miscellaneous expense 10
Total operating expenses 292
Operating income 464
Income tax expense 162
Net income $302
If Keller Company prepares a common size income statement, what will they report for
Rent expense?
A) 2.3%
B) 4.3%
C) 4.4%
D) 6.8%
Oak Creek Company uses activity-based costing, and normally produces 1,000,000
units per month. At this level of production, the costs per unit are as follows:
Direct materials used $15
Direct labor $6
Variable indirect production $1
Setup costs $5
For 1,000,000 units, 500 setups are required at a cost of $10,000 per setup. The
company has received a special order for 100,000 units at $22 per unit. The company
has excess capacity. The company estimates that 5 setups will be required for the
special order. Variable selling costs of $1 per unit will also be incurred for the special
order. What is the cost of the special order?
A) $2,300,000
B) $2,350,000
C) $2,700,000
D) $2,800,000
A management control system includes the techniques to gather and use information to
________.
A) motivate employee behavior
B) evaluate performance
C) make planning and control decisions
D) all of the above
Georgia Company has the following data available:
December December
31, 2011 31, 2012
Fixed Assets $125 $125
Accumulated Depreciation $110 $117
Long-term debt $125 $5
Common stock $300 $400
Retained earnings $100 $120
No dividends were declared or paid for the year ending December 31, 2012. What is the
net cash flow from financing activities for the year ended December 31, 2012?
A) $20 cash inflow
B) $20 cash outflow
C) $100 cash inflow
D) $120 cash outflow
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
What is the sequence of steps(order of preparation) for the operating budget?
A) sales budget, operating expense budget, purchases and cost of goods sold budget
B) sales budget, capital budget, operating expense budget
C) sales budget, purchases and cost of goods sold budget, schedule of cash collections
from customers, operating expense budget
D) sales budget, schedule of cash collections from customers, purchases and cost of
goods sold budget, schedule of cash disbursements for purchases, operating expense
budget
When preparing the budgeted income statement, which of the following is the source
for the amount of sales?
A) sales budget
B) purchases budget
C) operating expense budget
D) schedule of cash collections from customers
Problem solving information would NOT be used in which of the following situations?
A) decision to make or buy parts for a manufactured product
B) decision to replace equipment
C) decision to add or drop a division
D) evaluating the operating performance of a segment in the current year
A fraternity held a party. The fraternity prepared the following budget for 25 expected
attendees:
Room rental $150
Food 250
Entertainment 150
Decorations 75
Total Costs $625
Twenty-five people attended the party. The following costs were incurred:
Room rental $240
Food 320
Entertainment 125
Decorations 75
Total Costs $760
What is the variance for total costs?
A) $90 Unfavorable
B) $135 Unfavorable
C) $135 Favorable
D) $70 Unfavorable
Which of the following methods of allocating service department costs to user
departments is superior?
A) The step down method is superior because it is easy to understand.
B) The direct method is superior because it recognizes the support provided between
service departments.
C) The direct and step down methods allocate the same amount of total costs so both
methods are comparable.
D) The step down method is superior because it recognizes the support provided
between service departments.
The management control system should be designed to achieve the best possible
alignment between ________ and ________.
A) cost centers; profit centers
B) local managers’ decisions; upper managers’ bonuses
C) employee behavior; agency theory
D) local managers’ decisions; the actions upper management seeks
Henricks Company has the following information available:
Revenue $500,000
Variable production costs $100,000
Fixed production costs $100,000
Variable selling costs $50,000
Fixed selling costs $50,000
What is the gross margin and net income?
A) $200,000; $200,000
B) $250,000; $150,000
C) $300,000; $200,000
D) $400,000: $200,000
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