1) A flexible budget is a budget prepared for a different level of volume than that which
was originally anticipated.
2) The accounting rate of return uses non-cash flow factors including depreciation in
calculating the operating income of the asset.
3) Sustainability is generally described as the ability to meet the needs of the present
without compromising the ability of future generations to meet their own needs.
4) The direct labor rate variance describes differences in the anticipated (standard) labor
rate and the actual labor rate paid.
5) If a company’s plantwide overhead rate is allocated based on direct labor hours, then
each job will be allocated manufacturing overhead based on the total direct labor hours
incurred on the job, regardless of the manufacturing department in which those hours
were incurred.
6) The IMA issues the CMA designation.
7) In job costing, when raw materials are requisitioned for a job, the raw materials
inventory is credited.
8) One disadvantage of the payback method is that it does not consider the time value
of money.
9) Managers will want to use management by exception to determine which variances
are significant enough to warrant investigation.
10) Fixed costs that exist even after a product is discontinued are called unavoidable
fixed costs.
11) Variable costs are irrelevant to a special decision when those variable costs differ
between alternatives.
12) The operating leverage factor will be exactly “1” only if a company has no fixed
costs.
13) The contribution margin derived from different products is not used to motivate the
sales force to increase sales of the most profitable products.
14) Traditional income statements provide managers with little cost behavior
information.
15) If a company produces many different products, it will develop a standard cost for
each type of product.
16) Yellow Company’s variable expenses are 40% of sales and have monthly fixed
expenses of $15,000. The monthly target operating income is $3,750. What is the
monthly margin of safety in dollars if Yellow Company achieves its operating income
goal?
A) $(18,750)
B) $56,250
C) $6,250
D) $31,250
17) Cedar Mills Incorporated desires an operating income of $72,000. Its variable
expenses are $20,000 and its total fixed expenses have increased from $32,000 to
$60,000. Its unit contribution margin is $10. Its sales in units to achieve the target profit
is:
A) 15,200
B) 1,200
C) 13,200
D) 11,200
18) All of the following are responsibility centers except
A) cost center
B) profit center
C) investment center
D) equity center
19) Jim Bean Company has three product lines: D, E, and F. The following information
is available:
DEF
Sales revenue$80,000$42,000$20,000
Variable expenses$40,000$21,000$12,000
Contribution margin$40,000$21,000$8,000
Fixed expenses$12,000$15,000$17,000
Operating income (loss)$28,000$46,000$(9,000)
Jim Bean Company is thinking of discontinuing product line F because it is reporting an
operating loss. All fixed costs are unavoidable. Assuming Jim Bean Company
discontinues line F and is able to double the production and sales of product line E
without increasing fixed costs. What affect will this have on operating income?
A) Decrease $13,000
B) Increase $13,000
C) Increase $30,000
D) Increase $34,000
20) A transfer of $30,000 from the assembly department to the packaging department
would require the entry of a
A) debit to finished goods inventory
B) debit to WIP inventory-assembly
C) credit to WIP inventory-assembly
D) credit to raw materials inventory
21) Channel One Industries uses a standard costing system to apply manufacturing
costs to its production process. In May, Channel One anticipated producing 2,450 units
with fixed manufacturing overhead costs allocated at $7.40 per direct labor hour with a
standard of 1.5 direct labor hours per unit. In May, actual production was 3,200 units
and actual fixed manufacturing overhead costs were $23,000.
What was Channel One’s fixed manufacturing overhead volume variance for May?
A) $4,195 favorable
B) $4,195 unfavorable
C) $8,325 favorable
D) $8,325 unfavorable
22) Cash payments for merchandise inventory under the direct method of preparing the
statement of cash flows would be
A) shown as Cash payments under Operating Activities
B) shown as Cash receipts under Operating Activities
C) shown as Cash payments under Investing Activities
D) shown as Cash receipts under Investing Activities
23) After a company invests in capital assets, it will perform a ________ in order to
compare the actual to the projected net cash inflows.
A) cash flow analysis
B) pre and post analysis
C) post-audit
D) post-cash flow
24) The benefits of using the ABC costing system are higher if the company
A) has high indirect costs
B) produces many different products that use differing amounts of resources
C) has high indirect costs and produces many different products that use differing
amounts of resources
D) produces only one product
25) The Warren Company is considering investing in two alternative projects:
What is the payback period for Project 2?
A) 4.00 years
B) 5.56 years
C) 10.00 years
D) 16.00 years
26) Overallocated manufacturing overhead results when
A) production is less than last year
B) estimated overhead is less than actual overhead
C) actual overhead is less than allocated overhead
D) actual overhead is less than expected
27) Which of the following is an underlying assumption of the cost-volume-profit
graph?
A) Total fixed expenses will change during the accounting period
B) The sales mix of products is constantly changing
C) Volume is the only cost driver
D) Inventory levels are constantly changing
28) Costs incurred to avoid providing poor quality services would be considered to be
A) appraisal costs
B) activity-based costing
C) prevention costs
D) value engineering
29) During a period, 38,200 units were completed and 4,200 units were in ending WIP
inventory. Ending WIP was 75% complete for direct materials and 50% complete for
conversion costs. What are the equivalent units for direct materials?
A) 42,400
B) 41,350
C) 40,300
D) 31,800
30) On the statement of cash flows, which of the following sections includes the
purchase and sale of treasury stock?
A) Investing section
B) Operating section
C) Financing section
D) None of the above
31) The following information is provided by Greenbay Company:
The units were 80% complete for materials and 30% complete for conversion costs.
How much are the total costs for which Greenbay has to account (i.e., its total costs to
account for)?
A) $36,900
B) $48,900
C) $24,500
D) $24,400
32) Samson Incorporated provided the following information regarding its only
product:
Assuming there is excess capacity, what would be the effect on operating income of
accepting a special order for 5,000 units at a sale price of $40 per product? (NOTE:
Assume regular sales are not affected by the special order.)
A) Decrease by $66,250
B) Increase by $66,250
C) Increase by $200,000
D) Increase by $333,750
33) A ‘sales mix” is best described by which of the following?
A) A factor that restricts production or sales of a product
B) Costs that were incurred in the past and cannot be changed
C) Expected future costs that differ among alternatives
D) The relative number of all products to be sold
34) A snow removal business would be classified as a
A) manufacturing company
B) merchandising company
C) simple company
D) service company
35) Kramer Company manufactures coffee tables and uses an activity-based costing
system. Each coffee table consists of 20 separate parts totaling $240 in direct materials,
and requires 5.0 hours of machine time to produce. Additional information follows:
What is the cost of materials handling per coffee table?
A) $40.00
B) $20.00
C) $7.75
D) $15.00
36) The following information is provided by Alexandria Corporation:
The units in ending WIP inventory were 75% complete for materials and 50% complete
for conversion costs.
At the end of the year, what are the equivalent units for conversion costs?
A) 7,000
B) 9,000
C) 2,500
D) 11,500
37) Which of the following is not likely to be a cost driver of activities associated with
determining product cost?
A) Number of material requisitions
B) Number of cost accountant’s labor hours
C) Number of product inspections
D) Number of production orders
38) Which of the following is an example of an inventoriable cost when manufacturing
products?
A) Depreciation on office equipment
B) Depreciation on store building
C) Sales salaries expenses
D) Depreciation on factory equipment
39) Lucky Cow Dairy provided the following expense information for May:
What is the total cost for the customer service category of the value chain?
A) $82,000
B) $16,000
C) $73,000
D) $10,000
40) A manager is only accountable for expenses in a(n) ________ center.
A) cost
B) revenue
C) profit
D) investment
41) Which of the following best describes “target costing”?
A) An approach to pricing that begins with revenue at market price and subtracts
desired profit to arrive at target total cost
B) A factor that restricts production or sales of a product
C) All costs incurred along the value chain in connection with the product or service
D) An approach to pricing that begins with the product’s total cost and adds desired
profit
42) ISO 9001:2008 is a(n)
A) effective exchange of information between vendors and customers
B) system where production occurs only when needed
C) software system which integrates all departments
D) certification that a company complies with international quality standards
43) With regard to flexible budgets, which of the following statements is TRUE?
A) They are prepared for one level of sales volume
B) Managers use them to help plan for uncertainties
C) They are prepared by the accounting department on an annual basis
D) They are designed to estimate revenues only
44) The management strategy designed to eliminate waste is called a(n)
A) traditional thinking
B) lean thinking
C) activity-based costing
D) full costing
45) GlenGary Investment Corporation is analyzing a proposal to build condo units in
southern Florida. The project will require an initial invest of $500,000. The building has
a useful life of 20 years, a residual value of $200,000, and is depreciated on a
straight-line basis. GlenGary uses the accounting rate of return model to evaluate
investment projects. What is the minimum annual operating income that must be
generated by this project to achieve the 9% accounting return required by GlenGary?
A) $18,000
B) $45,000
C) $25,000
D) $27,000
46) Selected financial information for Brookeville Manufacturing is presented in the
following table (000s omitted).
What was operating income?
A) $2,530
B) $4,000
C) $3,350
D) $1,900
47) The Bedford 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 $30,000 of the current year’s current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the rate of return on net sales for the current year?
A) 0.37
B) 0.03
C) 0.14
D) 1.46
48) Records for Speedy’s Custom Networks contained the following data.
Compute:
a)Work in process inventory on June 30
b)Finished goods inventory on June 30
c)Cost of goods sold for June
