1) The sales budget is the cornerstone of the master budget.
2) A trend percentage is computed by dividing the dollar amount of change by the
base-year amount.
3) The principal amount, the interest rate, and the number of periods are all factors
needed to calculate the time value of money.
4) If the standard quantity allowed for direct materials is greater than the actual quantity
used, the quantity variance is unfavorable.
5) If a manager sees a potential outlier in the data, he or she should first determine
whether the data is correct.
6) Only manufacturers can use refined costing systems to allocate manufacturing
overhead.
7) When using the high-low method, fixed costs and variable costs appear in the same
cost equation.
8) The inventory turnover ratio is the ratio of cost of goods sold to average inventory.
9) Sales revenue less variable expenses equals contribution margin.
10) All else being equal, a company earns more income by selling low-contribution
margin products than by selling an equal number of high-contribution margin products.
11) Manufacturing overhead may include depreciation on the factory plant and
equipment, utilities to run the plant, property taxes and insurance on the plant, and
salaries of plant janitors.
12) The Internal Rate of Return, the Accounting Rate of Return, Net Present Value and
Payback Period are four recognized capital budgeting methods.
13) The total variable manufacturing overhead variance is composed of the rate
variance and the efficiency variance.
14) Trend percentages are not a form of vertical analysis.
15) The cost of wages paid to assembly-line workers should be treated as a
manufacturing overhead cost.
16) A company sold equipment with a book value of $10,000 at a gain of $2,500. How
much will be reported in the investing activities section of the statement of cash flows
as cash received upon the sale of the equipment?
A) The cash received upon the sale of the equipment was $7,500
B) The cash received upon the sale of the equipment was $2,500
C) The cash received upon the sale of the equipment was $12,500
D) The cash received upon the sale of the equipment was $10,000
17) To find the sales revenue needed to breakeven, the formula used could be
A) fixed expenses contribution margin ratio
B) contribution margin per unit fixed expenses
C) contribution margin ratio fixed expenses
D) fixed expenses contribution margin per unit
18) Fosnight Enterprises prepared the following sales budget:
The expected gross profit rate is 30% and the inventory at the end of February was
$10,000. Desired inventory levels at the end of the month are 20% of the next month’s
cost of goods sold.
What is the desired ending inventory on May 31?
A) $840
B) $9,800
C) $1,680
D) $1,960
19) Which of the following is used as the equation’s numerator when computing the
accounting rate of return for a capital asset?
A) Average amount invested in the asset
B) Average annual operating income from the asset
C) Total amount invested in the asset
D) Average net cash flows from the asset
20) I Scream For Ice Cream sells specialty ice cream in three flavors: Rocky Road,
Peanut Butter, and Fruity Tooty. It sold 15,000 gallons last year. For every five gallons
of ice cream sold, one gallon is Fruity Tooty and the remainder is split evenly between
Peanut Butter and Rocky Road. Fixed costs for I Scream For Ice Cream are $27,000
and additional information follows:
The breakeven sales volume in gallons for I Scream For Ice Cream is
A) 5,400
B) 7,500
C) 3,857
D) 13,500
21) Neeley Grocery has a monthly target operating income of $25,000. Variable
expenses are 20% of sales and monthly fixed expenses are $15,000. What is the
monthly margin of safety in dollars if the business achieves its operating income goal?
A) $ 50,000
B) $ 31,250
C) $ 68,750
D) $ 12,500
22) The equation for total fixed costs is
A) y = f
B) y = vx + f
C) y = vx – f
D) none of the above
23) Joe, Jeff and Jerry Frank own Frank Brothers Farm, a seed company specializing in
seed corn. At their weekly meeting they tried to calculate the portion of the farm’s
overhead expenses that is fixed and the portion that is variable. Over the past twelve
months, the number of bushels of seed corn that has been sold reached its peak in May,
when the total monthly overhead costs totaled $250,000 for 95,000 bushels of seed corn
sold. The lowest number of bushels sold in the last twelve months occurred in
December, when total overhead costs were $75,000 for 7,500 bushels sold. What is the
fixed portion of the monthly overhead expenses?
A) $60,000
B) $242,500
C) $190,000
D) $75,000
24) The city of Pittsburgh, Pennsylvania is reviewing proposals for the demolition of
historic, but dilapidated, homes in its “Old East End” neighborhood. The homes, many
dating back 150 years, contain lead paint, lead pipes, and asbestos insulation that must
be taken to a special landfill at a cost of $50,000 per house.
A second option for the city is to reclaim the old woodwork, and bricks of the historic
homes and repurpose the materials for use in new construction. This Old Crib
Deconstruction submitted the lowest bid of $450,000 to properly dismantle the old
homes. Construction Junction, which specializes in the sale of reclaimed building
materials, has offered to purchase the materials for $375,000.
What is the net cost to repurpose the building materials?
A) $75,000
B) $25,000
C) $125,000
D) $375,000
25) The COO is responsible for managing which of the following aspect(s) of the
company?
A) The annual audit
B) Internal controls
C) Research and development, production, and distribution
D) Financial accounting, managerial accounting, and tax accounting
26) Assume 12,500 units were in beginning WIP; 45,200 units were started; 47,000
units were completed; and 10,700 units were in ending WIP. Materials are added at the
beginning of the process. What is the total number of equivalent units for materials?
A) 55,900
B) 59,500
C) 45,200
D) 57,700
27) The ________ budget starts with the number of units to be produced.
A) production
B) operating expense
C) direct materials
D) All of these choices start with the number of units to be produced
28) The Sarbanes-Oxley Act requires the CPA firm to rotate the audit partner off of the
audit engagement every ________ year(s).
A) three
B) four
C) five
D) one
29) Sunnyside Orchards, a juice manufacturer, uses a process that adds flavoring at the
beginning of the process and vitamins and minerals 65% of the way through the
process. Conversion costs are evenly distributed. Assume there are no beginning
inventories. The company started making 14,000 gallons of the drink, and the 1,500
gallons left in ending WIP were 50% of the way through the process.
The number of equivalent units for vitamins and minerals is
A) 1,500
B) 13,250
C) 14,000
D) 12,500
30) Which of the following types of cash outlays has its own budget?
A) Capital expenditures
B) Dividends
C) Income taxes
D) All of the above
31) To follow is information about the units produced and total manufacturing costs for
Pine Enterprises for the past six months.
Using the high-low method, what is the variable cost per unit?
A) $1.44
B) $1.04
C) $0.50
D) $2.00
32) Methods for a company to meet target total cost and the profit goals if the current
cost of the product is higher than the target cost include which of the following?
A) Accept a lower profit
B) Cut fixed costs, cut variable costs
C) Cut fixed costs
D) Any of the above
33) Which of the following would have the least effect on a cost-benefit analysis?
A) Steadily rising prices
B) Rapidly declining prices
C) Constant prices
D) None of the above
34) 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 1,200 units at a sale price of $47 per product? The 1,200
units would not require any variable selling and administrative expenses. (NOTE:
Assume regular sales are not affected by the special order.)
A) Increase by $84,300
B) Decrease by $28,500
C) Increase by $24,300
D) Increase by $28,500
35) Which of the following is an example of a cost item that should be classified as a
prevention cost?
A) Maintenance of manufacturing machinery
B) Quality control checks
C) Rework costs
D) Warranty costs
36) Beloved Baby Company manufactures and sells children’s strollers. Each stroller
requires eight screws. For September, Beloved Baby Company will begin September
with 380 screws in its beginning inventory. Beloved Baby Company has budgeted
stroller sales of 530 strollers, while 570 strollers are scheduled to be produced. How
many screws should Beloved Baby Company purchase for September?
A) 150
B) 4,180
C) 4,940
D) 4,560
37) Jones Ice Cream Stand is operated by Mr. Jones and experiences different sales
patterns throughout the year. To plan for the future, Mr. Jones wants to determine its
cost behavior patterns. He has the following information available about the ice cream
stand’s operating costs and the number of soft serve cones served.
Using the high-low method, the monthly operating costsif Mr. Jones sells 1,436 ice
cream cones in a monthare
A) $750
B) $859
C) $1,109
D) $359
38) The primary goal of managerial accounting is to provide information to
A) internal decision-makers
B) shareholders
C) creditors
D) both shareholders and creditors
39) Which of the following certifications is issued by the IMA?
A) CISA
B) CFP
C) CMA
D) CPA
40) Madden Corporation manufactures t-shirts, which is its only product. The standards
for t-shirts are as follows:
During the month of May, the company produced 1,250 t-shirts. Related production
data for the month follows:
What is the direct materials quantity variance for the month?
A) $ 4,300 favorable
B) $ 4,300 unfavorable
C) $ 3,800 favorable
D) $ 3,800 unfavorable
41) All else being equal, a company with a high operating leverage will have
A) relatively low fixed costs
B) relatively high variable costs
C) relatively high contribution margin ratio
D) relatively low risk
42) Spice Company has a product which sells for $150 and has a unit contribution
margin of $75. It has fixed costs of $35/unit at the current production volume. Spice
Company’s contribution margin ratio is
A) 23%
B) 50%
C) 37%
D) 73%
43) The “rate of return that makes the NPV of a capital project equal to zero” is best
described by which of the following terms?
A) Accounting rate of return
B) Internal rate of return
C) Discount rate
D) Net present value
44) Rustic Living Furniture Company manufactures furniture at its central Kentucky
factory. Some of its costs from the past year include:
Period costs for Rustic Living Furniture Company totaled
A) $43,000
B) $35,500
C) $16,500
D) $65,000
45) Moon Appliance manufactures a variety of appliances which all use Part B89 .
Currently, Moon Appliance manufactures Part B89 itself. It has been producing 9,000
units of Part B89 annually. The annual costs of producing Part B89 at the level of 9,000
units include:
All of the fixed manufacturing overhead costs would continue whether Part B89 is
made internally or purchased from an outside supplier. Assume Moon Appliance can
purchase 9,000 units of the part from the Nadal Parts Company for $20.00 each, and the
facilities currently used to make the part could be used to manufacture 7,000 units of
another product that would have a $6 per unit contribution margin. If no additional
fixed costs would be incurred, what should Moon Appliance do?
A) Make the new product and buy the part to earn an extra $1.00 per unit contribution
to profit
B) Make the new product and buy the part to earn an extra $4.00 per unit contribution
to profit
C) Continue to make the part to earn an extra $3.00 per unit contribution to profit
D) Continue to make the part to earn an extra $8.00 per unit contribution to profit
46) Which of the following is a software system that integrates all of a company’s
departments?
A) ERP
B) Total Integrated Software
C) JIT
D) TQM
47) The cost-plus price is described by which of the following?
A) Target total cost plus desired profit
B) Total cost plus desired profit
C) Revenue at market price plus desired profit
D) Variable cost plus desired profit
48) Delivery expenses are charged to which of the following areas?
A) Distribution
B) Customer service
C) Production or purchases
D) Marketing
49) The following information relates to Truman Unlimited for the past two years.
The times-interest-earned ratio for the current year is
A) 13.5 times
B) 16.0 times
C) 2.0 times
D) 3.8 times
50) Hyde’s Headphones sells deluxe headphones for $75 each. Unit variable expenses
total $45. The breakeven sales in units is 2,400 and budgeted sales in units is 4,200 .
What is the margin of safety in dollars?
A) $24
B) $135,000
C) $495,000
D) $1,800
51) (Present value tables are needed.) Somerville Corporation is considering investing
in specialized equipment costing $618,000. The equipment has a useful life of 5 years
and a residual value of $55,000. Depreciation is calculated using the straight-line
method. The expected net cash inflows from the investment are:
Somerville Corporation’s required rate of return is 14%.
Is the internal rate of return of the investment equal to, higher than, or lower than 14%?
A) Equal to 14%
B) Higher than 14%
C) Lower than 14%
D) Cannot be determined from the given data
52) Ryan Fabrication allocates manufacturing overhead to each job using departmental
overhead rates. Ryan’s operations are divided into a metal casting department and a
metal finishing department. The casting department uses a departmental overhead rate
of $52 per machine hour, while the finishing department uses a departmental overhead
rate of $28 per direct labor hour. Job A216 used the following direct labor hours and
machine hours in the two departments:
The cost for direct labor is $32 per direct labor hour and the cost of the direct materials
used by Job A216 is $1,800.
What was the total cost of Job A216 if Ryan Fabrication used the departmental
overhead rates to allocate manufacturing overhead?
A) $2,434
B) $2,344
C) $2,888
D) $2,940
53) The time value of money is explained by which of the following?
A) Invested money earns income over time
B) Money is more valuable over time
C) A stream of payments is received over time
D) Interest is always compounded over time
54) If a regression analysis shows an R factor of 0.15, it is safe to assume
A) a strong positive relationship between cost and volume
B) a strong negative relationship between cost and volume
C) a perfect positive relationship between cost and volume
D) a very weak relationship between cost and volume