1) Martin Enterprises provides the following information about its single product.
How many units must be sold to earn the targeted operating income?
A) 13,417
B) 63,000
C) 40,900
D) 22,100
2) Brittany Furniture manufactures two products: Couches and Beds. The following
data are available:
The company can manufacture two couches per machine hour and one bed per machine
hour. The company’s production capacity is 900 machine hours per month.
What is the contribution margin per machine hour for couches?
A) $1,700
B) $300
C) $150
D) $250
3) In a process system, direct labor and manufacturing overhead are normally
A) incurred at the end of the process
B) incurred evenly throughout the process
C) incurred in full at the beginning of the process
D) not recorded
4) 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 pound 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 sales mix percentage of Fruity Tooty based upon pounds is
A) 71%
B) 40%
C) 75%
D) 20%
5) Victoria Corporation manufactures quality vases. Budgeted sales and production data
for the vases are as follows:
The ending inventory for each month should be equal to 20% of the next month’s
production needs. Each vase requires one pound of clay in its manufacture. Victoria
Corporation has a policy that the inventory of clay at the end of each month needs to be
equal to 20% of the production needs for the following month. At the beginning of
January, 480 pounds of clay were in inventory. How many pounds of clay would
Victoria Corporation need to purchase in February?
A) 2,660
B) 2,940
C) 3,620
D) 2,840
6) Machine set-up would most likely be classified as a ________ cost.
A) batch-level
B) unit-level
C) product-level
D) facility-level
7) 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 debt ratio for the current year?
A) 0.21
B) 0.06
C) 1.27
D) 0.35
8) The contribution margin income statement presents ________ above the contribution
margin line.
A) only variable expenses relating to selling and administrative activities
B) only fixed expenses relating to selling and administrative activities
C) all fixed expenses
D) all variable expenses
9) 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 rate of return on total assets for the current year?
A) 28%
B) 32%
C) 0.35%
D) 22.86%
10) Your client’s company wants to determine the relationship between its monthly
operating costs and a potential cost driver. The output of regression analysis showed the
following information:
Intercept Coefficient = 89,500
X Variable 1 Coefficient = 62.50
R-square = 0.9855
What is the company’s monthly cost equation?
A) y = $98.55x + $89,500
B) y = $62.50x + $89,500
C) y = $89,500x + $62.98
D) y = $89,500x + $98.55
11) Which of the following entries would be made to record the purchase of $30,000 of
raw materials?
A)
B)
C)
D)
12) The ________ element in the value chain would contain inventoriable costs for a
manufacturer.
A) research and development
B) production
C) design
D) distribution
13) Papa Pastries sells Donuts, Muffins, and Mixed Dozens. It sold 10,000 dozens last
year. Mixtures outsold Muffins by a margin of 2 to 1 . Sales of Donuts were the same as
sales of Mixtures. Fixed costs for Papa Pastries are $19,600 and additional information
follows:
a. Calculate the sales mix percentage of all three products (based upon the number of
dozens).
b. Calculate the weighted average contribution margin for all three types of dozens.
c. Calculate the breakeven volume in number of dozens.
d. Calculate the breakeven sales in dollars.
14) Kent Coffee Haus sells Drip Coffee, Cappuccino, or Lattes. It sold 20,000 total cups
of various coffee products last year. Drip Coffee outsold Cappuccino 2 to 1 . Sales of
Lattes were the same as sales of Drip Coffee. Fixed costs for the company are $15,000
and additional information follows:
a.Calculate the sales mix percentage of all three products (based upon the number of
cups).
b.Calculate the weighted average contribution margin for all three types of drinks.
c.Calculate the breakeven volume in number of cups.
d.Calculate the breakeven sales in dollars.
15) On a whim you purchased a scratch-off lottery ticket at the gas station. It must have
been your lucky day because you won $1,000,000. Being logical and rational you
decide to invest the money at 3% for 10 years until you are ready to start a family. At
the end of 10 years, how much will your investment be worth?
A) $11,464,000
B) $1,344,000
C) $744,000
D) $1,384,000
16) The costs incurred by a manufacturer of lawn mowers to develop a method to
reduce carbon dioxide emissions from its products would be categorized as what type of
cost by an environmental management accounting system (EMA)?
A) Research and development cost
B) Waste and emission control cost
C) Prevention cost
D) Materials cost of product output
17) Research and development would most likely be classified as a ________ cost.
A) unit-level
B) batch-level
C) facility-level
D) product-level
18) Sound Design sells its computer speakers for $115 per set. Its variable cost is $75
per set of speakers. Fixed costs are $80,000 per month for volumes up to 2,400 sets of
speakers. Above 2,400 sets, monthly fixed costs are $115,000. What is the budgeted
operating income (loss) at a sales level of 2,300 sets of speakers per month?
A) Operating loss of $23,000
B) Operating income of $92,000
C) Operating income of $12,000
D) Operating income of $184,500
19) Willard’s Department Store has budgeted cost of goods sold of $42,000 for its men’s
shorts in March. Management also wants to have $7,600 of men’s shorts in inventory at
the end of March to prepare for the summer season. Beginning inventory of men’s
shorts for March is expected to be $5,500. What dollar amount of men’s shorts should
be purchased in March?
A) $39,900
B) $44,100
C) $55,100
D) $29,900
20) How does depreciation affect the calculation of a project’s payback period?
A) Depreciation is deducted from the annual cash inflows
B) Depreciation is added to the annual cash inflows
C) Depreciation is only deducted if the payback period exceeds five years
D) Depreciation does not affect the payback calculation
21) A company’s margin of safety is computed as
A) actual salesexpected sales
B) expected salesactual sales
C) expected salessales at breakeven
D) sales at breakevenexpected sales
22) Lots of Stuff Company reports the following data for its first year of operation.
What are the total manufacturing costs?
A) $455,000
B) $595,000
C) $750,000
D) $520,000
23) Troy Company budgeted $12 million for customer service costs, but actually spent
only $10 million. Which of the following statements is the best course of action for
management to take in this instance?
A) Management will investigate this $2 million favorable variance to ensure that the
cost savings do not reflect skimping on customer service
B) Because this $2 million variance is favorable, management does not need to
investigate further
C) Management will investigate this $2 million unfavorable variance to try to identify
and correct the problem
D) Management should not investigate every major variance, especially the unfavorable
ones
24) Purchases for May were $60,000, while expected purchases for June and July are
$75,000 and $92,000, respectively. All purchases are paid 35% in the month of
purchase and 65% the following month. At what amount are June payments for
purchases budgeted?
A) $69,750
B) $65,250
C) $86,050
D) $97,450
25) Vandalay Industries manufactures two products: toasters and blenders. The annual
production and sales of toasters is 2,200 units, while 1,500 units of blenders are
produced and sold. The company has traditionally used direct labor hours to allocate its
overhead to products. Toasters require 1.25 direct labor hours per unit, while blenders
require .75 direct labor hours per unit. The total estimated overhead for the period is
$149,115. The company is looking at the possibility of changing to an activity-based
costing system for its products. If the company used an activity-based costing system, it
would have the following three activity cost pools:
The predetermined overhead allocation rate using the traditional costing system would
be closest to
A) $40.30 per direct labor hour
B) $132.55 per direct labor hour
C) $54.22 per direct labor hour
D) $38.48 per direct labor hour
26) The Sunny Division of Miami Corporation reported the following results from the
past year. Shareholders require a return of 10%. Management calculated a
weighted-average cost of capital (WACC) of 5%. Sunny’s corporate tax rate is 30%.
What is the division’s Residual Income (RI)?
A) $70,000
B) $77,500
C) $100,000
D) $250,000
27) In the flow of costs, which of the following comes first?
A) Cost of goods sold
B) Finished goods inventory
C) Work in process inventory
D) Raw materials inventory
28) Creating budgets are part of which primary management responsibility?
A) Controlling
B) Planning
C) Managerial accounting
D) Directing
29) Selected financial data for Spark Enterprises follows for a production level of
120,000 units:
a.Calculate the variable cost per unit.
b.If Flash Corporation makes 75,000 units, calculate the fixed cost per unit.
c.If Flash Corporation makes 160,000 units, calculate the total variable costs.
d.If Flash Corporation makes 280,000 units, calculate the total costs.
30) When a company has established separate manufacturing overhead rates for each
department, it is using:
A) departmental overhead rates
B) cost distortion
C) a plantwide overhead rate
D) none of the above
31) Catamount Studios has budgeted the following amounts for its next fiscal year:
If Catamount Studios can reduce fixed expenses by $46,500, by how much can variable
expenses per unit increase and still allow the company to maintain the original
breakeven sales in units?
A) $1.50
B) $20.00
C) $21.50
D) $18.50