A unit of ending inventory has a cost of $100 per unit. The selling price per unit is
$200. The replacement cost per unit is $90. What value is reported for this inventory on
the balance sheet?
A) $90
B) $100
C) $110
D) $200
Thompson Company currently produces 10,000 units of a key part at a total cost of
$512,000 annually. Annual variable costs are $300,000. Of the annual fixed costs,
$140,000 relate specifically to this part. The remaining fixed costs are unavoidable.
Another manufacturer has offered to supply the part for $48 per unit. The facilities
currently used to manufacture the part could be used to manufacture a new product with
an expected contribution margin of $60,000 annually. Alternatively, the facilities could
be rented out at $70,000 annually. If Thompson Company makes the part, what is the
annual opportunity cost of the facilities?
A) $13,000
B) $28,000
C) $60,000
D) $70,000
Consider a firm that provides services to customers. To record revenue, which of the
following conditions must be met?
A) the firm must render the services only
B) the firm must render the services and receive cash or a promise of payment in the
future
C) the firm must render the services and receive cash
D) the firm must promise to render the services in the future and receive cash
Important factors used to forecast sales for a company include all of the following items
EXCEPT ________.
A) changes in firm’s prices
B) general economic conditions
C) changes in product mix
D) layout of production equipment
Goods undergoing the production process but not fully complete are called ________.
A) Merchandise Inventory
B) Raw Materials Inventory
C) Finished Goods Inventory
D) Work-in-Process Inventory
The ________ account is supported by a file of job-cost records for partially completed
jobs.
A) Direct Materials Inventory
B) Finished Goods Inventory
C) Cost of Goods Sold
D) Work-In-Process Inventory
Corrao Company manufactures a part for its production cycle. The costs per unit for
10,000 units of the part are as follows:
Per Unit
Direct materials $20.00
Direct labor 13.00
Variable factory overhead 15.00
Fixed factory overhead 14.00
Total costs $62.00
The fixed factory overhead costs are unavoidable. Assuming no other use for the
facilities, what is the highest price that Corrao Company should be willing to pay for
the part?
A) $33
B) $47
C) $48
D) $62
Presented below is the balance sheet of Houser Company at January 1, 2015:
Cash $100
Net Fixed Assets 400
Total Assets $500
Accounts Payable $20
Long-term Bonds Payable 220
Stockholders’ Equity 260
Total Liabilities and Stockholders’ Equity $500
The balance sheet of Maury Company at January 1, 2015 is below:
Cash $400
Net Fixed Assets 380
Total Assets $780
Accounts Payable $120
Long-term Bonds Payable 280
Stockholders’ Equity 380
Total Liabilities and Stockholders’ Equity $780
On January 1, 2015, Maury Company acquired 100 percent of the outstanding common
stock of Houser Company for $260 cash. The book value and fair value of Houser’s
assets and liabilities were equal. What is the amount of Total Assets on the consolidated
balance sheet immediately after the acquisition of Houser Company’s stock? (Assume
elimination entries are completed.)
A) $0
B) $780
C) $1,020
D) $1,280
No matter how many technical experts a company uses in forecasting, the sales budget
should ultimately be the responsibility of the ________.
A) economists
B) CEO
C) line managers
D) market research staff
Monday Company has two departments. Relevant information is presented below:
Department 1 Department 2
Budgeted total assets $500,000 $200,000
Actual total assets $600,000 $400,000
Budgeted sales $400,000 $2,000,000
Actual sales $200,000 $2,100,000
Total company-wide advertising costs are $360,000. The advertising costs are allocated
based on sales using the preferred approach. What amount of advertising costs is
allocated to Department 2?
A) $37,500
B) $50,000
C) $262,500
D) $300,000
The following information is available for Pet Store Company and its two divisions, Pet
Supplies and Training.
Whole Pet Supplies Training
Company Division Division
Net sales $170,000 $70,000 $100,000
Fixed costs:
Controllable by division managers 16,000 10,000 6,000
Controllable by others 8,000 6,000 2,000
Variable costs:
Cost of merchandise sold 46,000 28,000 18,000
Operating expenses 14,000 8,000 6,000
Unallocated costs 14,000
Required:
A) Compute the contribution margin for the Pet Supplies Division.
B) Compute the contribution controllable by the manager of the Training Division.
C) Compute the contribution by segment for the Training Division.
D) Compute the income before taxes for the whole company.
For manufacturing companies, an example of a period cost is ________.
A) direct materials
B) research and development expense
C) direct labor
D) factory overhead
In a process costing system, which of the following entries is prepared to transfer a
finished food product from the cooking process to the packaging process?
A) Debit Work-In-Process Inventory—Cooking, Credit Work-In-Process Inventory—
Packaging
B) Debit Finished Goods Inventory—Credit Work-In-Process Inventory—Packaging
C) Debit Work-In-Process Inventory—Packaging, Credit Work-In-Process Inventory—
Cooking
D) Debit Work-In-Process Inventory—Packaging, Credit Finished Goods Inventory
In a clothing factory, clothing items are sewn by hundreds of workers using sewing
machines and hand stitching. The sewing machines are used 80 percent of the time it
takes to make the clothing items. Overhead costs relate primarily to electricity and
indirect materials such as needles, bobbins, thread and thimbles. What is the most
appropriate cost-allocation base for applying overhead costs to the clothing items?
A) the number of sewing machines
B) the number of direct labor hours
C) the number of sewing machine hours
D) the number of workers
In relation to a cost function, the term reliability means ________.
A) whether the costs and activities can be easily observed
B) whether the cost function conforms to a given mathematical model
C) how well the cost function predicts future costs
D) how well the cost function explains past cost behavior
The following sales budget has been prepared:
Month Cash Sales Credit Sales
September $167,000 $123,000
October 225,000 180,000
November 330,000 210,000
December 135,000 190,000
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 December?
A) $135,000
B) $197,000
C) $325,000
D) $332,000
When a company uses economic profit as a performance metric, managers have an
incentive to invest only in projects ________.
A) earning less than the return on investment of the segment or division
B) earning more than the return on investment of the segment or division
C) earning more than the cost of capital of the segment or division
D) earning less than the cost of capital of the segment or division
Flexible budget variances are the deviations of actual results from the ________.
A) flexible budget amounts for the achieved level of activity
B) flexible budget amounts for the static level of activity
C) static budget amounts for the expected level of activity
D) static budget amounts for last year’s level of activity
In target costing, managers design a product so that the product’s cost does not exceed
________.
A) the product’s production costs
B) the product’s nonproduction costs
C) the product’s production and nonproduction costs
D) the product’s target cost
If the internal rate of return on a project is ________ the required rate of return, then the
project should be accepted.
A) higher than
B) lower than
C) the same as
D) none of the above
Accepting a project with a ________ NPV makes the firm worse off financially because
the cost of the investment exceeds the ________.
A) positive; present value of future benefits
B) negative; present value of future cash flows
C) negative; present value of present cash flows
D) positive; present value of present cash flows
In the immediate write-off approach to overhead variances, overapplied overhead is
regarded as a(n) ________.
A) addition to the cost of inventory
B) reduction to the cost of inventory
C) increase in cost of goods sold
D) decrease in cost of goods sold
On May 1, Gonzalez Company paid $36,000 for rent. The rent covers the period May 1
through August 31. Gonzalez Company recorded Prepaid Rent of $36,000. What is the
Rent Expense for the period, May 1 through June 30?
A) $0
B) $9,000
C) $18,000
D) $27,000
Carlson Company has two departments. Factory overhead costs are applied based on
direct labor cost in Department A and machine hours in Department B. The following
information is available:
Budgeted Costs Dept. A Dept. B
Direct labor cost $150,000 $165,000
Machine hours 51,000 20,000
Factory overhead cost $225,000 $180,000
Actual data for Job #10 are as follows:
Actual Costs Dept. A Dept. B
Direct materials requisitioned $10,000 $16,000
Direct labor cost $11,000 $14,000
Machine hours 5,000 3,000
Required:
A) Compute the budgeted factory overhead rate for Department A.
B) Compute the budgeted factory overhead rate for Department B.
C) What is the total overhead cost for Job #10?
D) If Job #10 consists of 50 units of product, what is the unit cost of this job?
Which of the following statements report the amount of net income earned by a
company for a period of time?
A) balance sheet and income statement only
B) income statement and statement of cash flows only
C) income statement, statement of retained earnings and statement of stockholders’
equity
D) balance sheet and statement of cash flows only
Marjorie Company has the following information:
Month Budgeted Purchases
January $25,000
February 19,000
March 33,000
April 27,000
May 27,680
Purchases are paid as follows:
75% in the month of purchase
25% one month after purchase
What are the estimated cash disbursements in March?
A) $22,500
B) $24,750
C) $29,500
D) $39,000
The balance sheet for Jennifer Company is given below:
Cash $200
Accounts Receivable 236
Inventory 388
Prepaid Insurance 76
Fixed Assets 452
Accumulated Depreciation (228)
Total Assets $1,124
Accounts payable $152
Wages payable 32
Notes payable 420
Paid-in capital 160
Retained earnings 360
Total liabilities and stockholders’ equity $1,124
If a common-size balance sheet was prepared, what would Jennifer Company report for
Cash?
A) 17.8%
B) 21.5%
C) 25.2%
D) 62.3%
What does the margin of safety in units measure?
A) how far fixed costs can rise before an operating loss occurs
B) how far variable costs can rise before an operating loss occurs
C) how far total costs can rise before an operating loss occurs
D) how far sales can fall before an operating loss occurs
The Matthew Company makes tables 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 17 pounds $5.20 per pound
Direct Labor 3 hours $16 per hour
Production of 200 tables was expected in May, but 220 tables were actually completed.
Direct materials purchased and used were 2,100 pounds at an actual price of $4.40 per
pound. Direct labor cost for the month was $10,620, and the actual pay per hour was
$18.00. What is the direct labor price variance for the month of May?
A) $1,180 Favorable
B) $1,180 Unfavorable
C) $1,200 Favorable
D) $1,200 Unfavorable
Reasons for the post-audit of an investment project do NOT include ________.
A) ensuring that the investment expenditures are proceeding on time and within budget
B) providing information for improving future predictions of cash flows
C) evaluating the continuation of the project
D) comparing actual project results with actual results from prior projects to evaluate
manager performance
Paulson Company’s expected sales for April are $29,000. Other information follows:
Budgeted Operating Expenses Amount
Wages $4,000
Advertising 1,680
Depreciation 1,440
Rent 2,560
Promotion 5% of sales
What are the total expected operating expenses for April?
A) $6,240
B) $9,680
C) $9,690
D) $11,130
The following information pertains to Singh Company:
Average total assets $50,000
Net operating profit after taxes $15,000
Total current liabilities $30,000
Total expenses $60,000
Total liabilities $35,000
Total revenues $80,000
Invested capital is defined as total assets. The capital charge is 10%. What is the
residual income?
A) $1,600
B) $10,000
C) $15,000
D) $20,000
Goller 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 26
Rent expense 36
Miscellaneous expense 70
Total operating expenses 292
Operating income 464
Income tax expense 100
Net income $364
If Goller Company prepares a common size income statement, what will they report for
Income tax expense?
A) 6.4%
B) 11.0%
C) 12.4%
D) 39.9%