Examples of service departments in a hospital include the housekeeping and laundry
departments.
Goodwill is amortized on the consolidated financial statements.
Management control systems in nonprofit organizations will never be as highly
developed as in profit-seeking firms because output measurements are more difficult.
Step costs change abruptly at different levels of cost-driver activity.
Dysfunctional decisions are decisions that conflict with organizational goals and
objectives.
In process costing, the transferred-in costs include only direct materials costs.
Generally Accepted Accounting Principles in the United States are developed by the
International Accounting Standards Committee.
The nominal rate of interest equals the real rate of interest minus the inflation rate.
The most common reason for a variance between actual overhead costs and applied
overhead costs is the actual level of volume does not equal the level used to calculate
the budgeted overhead rate.
In the management control system, feedback and learning affect all elements of the
system.
Prices based on variable costs represent a contribution approach to pricing.
A profit center can exist in a nonprofit organization.
Source documents used in job-order costing include material requisition forms and time
cards.
In a manufacturing company, unsold, fully complete products are called
Work-In-Process Inventory.
The break-even point is the level of revenue at which revenue equals fixed costs.
Qualitative aspects of information are those for which measurement in dollars and cents
is easy and precise.
Public relations costs and top management salaries are examples of central corporate
support costs.
Future costs are irrelevant if they are the same under all feasible alternatives.
Relevant information is the historical costs and revenues that differ due to alternative
courses of action.
A cost pool is a group of individual costs that is allocated to cost objects.
The variable-costing income statement uses the contribution-approach format.
A manager using information to decide whether to add or drop a product is an example
of problem solving.
The immediate write-off method of disposing of underapplied overhead subtracts the
dollar amount from Cost of Goods Sold.
Gross margin is a subtotal on a variable-costing income statement.
The proponents of gross book value for purposes of calculating return on investment
maintain that it facilitates comparisons between years and between plants or divisions.
Traditional costing systems generally allocate nonproduction value-chain costs to
products.
The production volume variance measures the difference between applied and budgeted
fixed overhead.
By-products normally have significant sales value in comparison with other
jointly-produced products emerging at the split-off point.
When using an NPV model, we assume predicted cash flows are certain to occur at the
times specified.
Equivalent units are computed to assign costs to partially completed units.
Companies that use job-order costing normally have uniform production steps.
The controller is primarily concerned with a company’s financial matters and the
treasurer is concerned with a company’s operating matters.
Working capital is equal to current assets plus current liabilities.
Companies use cost-plus pricing for products where management actions can influence
the market price.
When choosing among several investments, managers should pick the project with the
highest net present value.
When preparing a budgeted balance sheet, the balance in the equipment account is
derived from information in the ________.
A) operating expense budget
B) capital budget
C) purchases and cost of goods sold budget
D) schedule of cash disbursements for operating expenses
The most widely used approach to disposing of overhead variances is ________.
A) to allocate it between finished goods inventory, work-in-process inventory and direct
materials inventory
B) to allocate it between cost of goods sold, finished goods inventory and
work-in-process inventory
C) to allocate it between cost of goods sold, finished goods inventory and direct
materials inventory
D) immediate write-off
The gain or loss on the disposal of equipment is determined by ________.
A) subtracting the book value of the old equipment to the cost of the new equipment
B) subtracting the disposal value of the old equipment to the book value of the old
equipment
C) subtracting the book value of the old equipment from the cash received for the old
equipment
D) subtracting the book value of the old equipment from the cost of the new equipment
Which of the following statements about the payback model is FALSE?
A) The payback model measures how quickly investment dollars may be recouped.
B) The payback model provides a rough estimate of the riskiness of a project.
C) The payback model does not consider cash flows after the payback period.
D) The payback model measures profitability.
Which of the following is the first and most basic component in a management control
system?
A) the organization’s long-range budget
B) the organization’s goals
C) the stockholders’ goals
D) managerial effort
To increase and improve employees’ work efforts in organizations, organizations should
link ________ to ________ such as bonuses.
A) motivation; goal congruence
B) managerial effort; key success factors
C) managerial control; motivation
D) performance measures; personal rewards
Paul Company’s expected sales for April are $27,600. Other information follows:
Budgeted Operating Expenses Amount
Wages $2,000
Advertising 1,680
Patent amortization 1,440
Rent 2,560
Marketing 5% of sales
Which of the following operating expenses is a noncash expense?
A) Advertising
B) Rent
C) Patent amortization
D) Wages
In the net present value method, the disposal value of a long-term asset at the end of its
useful life is considered to be a ________.
A) cash outflow at time zero
B) cash inflow at time zero
C) cash outflow in the year of disposal
D) cash inflow in the year of disposal
Brother Company prints calendars. All direct materials are added at the inception of the
printing process. There were 20,000 units in beginning inventory with a direct material
cost of $1,000 and conversion costs of $3,760.
During the month of April, 160,000 calendars were started and 144,000 calendars were
completed. Direct materials cost $26,000 for the month of April. Conversion costs for
the month of April were $20,000.
Ending work-in-process units are 100% complete with regard to direct materials and
40% complete with regard to conversion costs. The weighted-average method of
process costing is used by Binding Company.
Required:
A) Compute the equivalent units for materials and conversion costs.
B) Compute the unit costs for materials and conversion costs.
C) Compute the cost of units transferred.
D) Compute the cost of ending work-in-process inventory.
In process costing, which of the following cost(s) is(are) usually included in
transferred-in costs?
A) direct materials cost only
B) conversion costs only
C) direct materials cost and conversion costs
D) none of the above
If there is a competitive market for the product being transferred internally, using the
________ as the transfer price will lead to ________.
A) full cost; goal congruence
B) variable cost; goal congruence
C) full cost plus profit; goal congruence
D) market price; goal congruence
A cost accounting system called GPK uses ________ cost pools to allocate ________.
A) 10-20; indirect manufacturing costs
B) 1-10; direct manufacturing costs
C) 400 to 2000; indirect manufacturing costs
D) 1-20; direct manufacturing costs
To support managers’ decisions, accountants develop cost management systems that are
________.
A) also used by external users such as investors and lenders
B) computer programs with specialized accounting language
C) a collection of tools and techniques that identify how decisions affect costs
D) composed of at least 400 cost pools
An example of central corporate support costs includes ________.
A) tax planning department
B) human resources department
C) maintenance department
D) company cafeteria
Which action will decrease a company’s break-even point?
A) reducing total fixed costs
B) decreasing contribution margin per unit
C) increasing variable cost per unit
D) decreasing the selling price per unit
Beckronski Company has the following information available for the month of March:
Units Transferred- Direct Conversion
in Costs Materials Costs
Work-in-process inventory, March 1 240 $33,600 0 $18,000
*Percent complete 100% 0% 62.5%
Transferred-in during March 400
Completed in March 440
Work-in-process inventory, March 31 200
*Percent complete 100% 0% 80%
Costs added in March $52,000 $13,200 $48,600
The company uses the weighted-average cost method of process costing. What are the
equivalent units for March for direct materials?
A) 400
B) 440
C) 600
D) 640
When examining a master budget, where does a company find the planned expenditures
for facilities and equipment?
A) operating expense budget
B) capital budget
C) operating budget
D) purchases budget
Park Ridge Company is considering the replacement of a machine that is presently used
in production. The following data are available:
Old Machine New Machine
Original cost $200,000 $160,000
Useful life in years 10 5
Current age in years 5 0
Book value $100,000 –
Disposal value now $32,000 –
Disposal value in 5 years 0 0
Annual cash operating costs $20,000 $14,000
Adding all five years together, the total relevant costs to consider if the old machine is
kept is ________.
A) $32,000
B) $68,000
C) $80,000
D) $100,000
The contribution approach to the income statement offers several benefits to decision
makers. Which of the following is NOT a benefit of this approach?
A) This approach makes it easier to understand the impact of changes in sales volume
on operating income.
B) This approach stresses the role of fixed costs in operating income.
C) This approach is used with CVP analysis.
D) This approach is accepted by U.S. Generally Accepted Accounting Principles.
Assume the sales price is $34 per unit and the variable cost is $19 per unit. The
break-even point is 12,000 units. What are total fixed costs?
A) $180,000
B) $190,000
C) $340,000
D) $530,000
The adjusting entry for wages earned but unpaid results in a(n) ________.
A) increase in expenses and an increase in liabilities
B) increase in expenses and a decrease in liabilities
C) decrease in expenses and a decrease in liabilities
D) decrease in expenses and an increase in liabilities
All of the following can be sources of benchmarks EXCEPT for ________.
A) competitors
B) organization itself
C) organizations with dissimilar processes
D) organizations with similar processes
In the capital budgeting process, accountants are NOT involved in ________.
A) follow-up monitoring of investments
B) choosing which investments to make
C) gathering data to aid the investment decision
D) identifying potential investments
To determine the cost of a main product with by-products, we take the cost of the main
product and ________.
A) add separable costs of the by-products and add revenues from the by-products
B) add separable costs of the by-products and subtract revenues from the by-products
C) subtract separable costs of the by-products and add revenues from the by-products
D) subtract separable costs of the by-products and subtract revenues from the
by-products
In job-order costing, a debit to Finished Goods Inventory is used to record the
________.
A) requisition of direct materials
B) cost of goods completed
C) sale of merchandise
D) purchase of direct materials
Why do most nonprofit organizations face substantial difficulties in implementing
management control systems?
A) The outputs of nonprofit organizations are easy to measure.
B) It is difficult to measure the quantity of outputs from nonprofit organizations.
C) It is difficult to measure the quality of outputs from nonprofit organizations.
D) B and C
Under variable costing, fixed manufacturing overhead costs are a ________ cost. Under
absorption costing, fixed manufacturing overhead costs are a ________ cost.
A) product, period
B) period, product
C) product, product
D) period, period
In absorption costing, costs are separated into two categories of ________.
A) fixed costs and variable costs
B) variable costs and manufacturing costs
C) fixed costs and manufacturing costs
D) manufacturing costs and nonmanufacturing costs
Equipment to be sold has a book value of $4,000. The cost of the equipment is $10,000.
The cash received at sale is $2,000. What is the gain or loss on disposal of the
equipment?
A) loss on disposal of $2,000
B) loss on disposal of $4,000
C) loss on disposal of $6,000
D) gain on disposal of $2,000
Sherry Company manufactures phones in a two-department process that involves
Assembly and Finishing. The Assembly Department reported the follow data for the
past month:
Direct materials added $336,000
Direct labor 460,320
Factory overhead 204,000
Total costs to account for $1,000,320
Units started 80,000
Units completed and transferred 67,200
Units not complete 12,800
Units in beginning inventory 0
The partially complete units at the end of the month were 100 percent complete with
respect to materials and 75 percent complete with respect to conversion costs. The unit
cost of conversion costs is ________.
A) $3.00
B) $6.00
C) $8.65
D) $9.00
In a typical manufacturing factory, line functions do NOT include ________.
A) purchasing
B) stamping
C) welding
D) assembly
Southridge Corporation has a joint process that produces two products: A and B. Each
product may be sold at the split-off point or processed further and then sold.
Joint-processing costs for a year are $20,000.
Product A can be sold at the split-off point for $32,000. Alternatively, Product A can be
processed further and sold for $40,000. Additional processing costs are $5,000.
When deciding whether to sell Product A at the split-off point or to process further, the
________ is NOT relevant.
A) joint processing cost of $20,000
B) sales value at split-off of $32,000
C) sales value at completion of $40,000
D) additional processing cost of $5,000
According to the Statement of Ethical Professional Practice drafted by the IMA, the
standard of integrity states that each member has a responsibility to ________.
A) communicate information fairly and objectively
B) mitigate actual conflicts of interest
C) recognize and communicate professional limitations or other constraints that would
preclude responsible judgment or successful performance of an activity
D) disclose delays or deficiencies in information
French Company acquired 80 percent of the outstanding shares of Godiva Company for
$152 in cash. (No goodwill was present at the time of acquisition.) The net income for
the current year for French Company is $100. The net income for the current year for
Godiva Company is $20. There were no intercompany sales. The book value and fair
value of Godiva’s assets and liabilities were equal at the acquisition date. What is the
net income on the consolidated income statement for the current year?
A) $80
B) $96
C) $100
D) $116
The components of a successful organization are organizational learning, business
process improvement, ________ and ________.
A) profitability; organizational culture
B) profitability; customer satisfaction
C) customer satisfaction; financial strength
D) goal congruence; managerial effort