1) When units are sold, Finished Goods Inventory is debited.
2) Net income is used as the base for vertical analysis percentages on the income
statement.
3) When units are sold, Finished Goods Inventory is credited.
4) A rolling budget is a budget that is continuously updated so that the next 12 months
of operations are always budgeted.
5) A merchandising company will have a production budget.
6) The process of making capital investment decisions is referred to as capital
budgeting.
7) A quantity variance for production inputs is the difference between the actual
quantity of input and the standard quantity of input, multiplied by the standard unit
price of input.
8) The predetermined manufacturing overhead rate is calculated by multiplying the total
estimated manufacturing overhead costs by the total estimated amount of the allocation
base.
9) Regression analysis can be used in ABC implementations to help managers select the
primary cost driver for an activity cost pool.
10) In a job cost system, all costs flow to a particular job.
11) As a result of cost distortion, some products will be overcosted while other products
will be undercosted.
12) Strategic planning involves setting long-term goals that extend 5-10 years into the
future.
13) Product testing is an appraisal cost.
14) When a company uses the indirect method to present the statement of cash flows, a
gain on the sale of a long-term asset must be added to net income to reconcile to net
cash provided by operating activities.
15) Merchandisers use a “cost of goods sold, inventory, and purchases” budget to
calculate the amount of merchandise to purchase.
16) Decentralization may duplicate a company’s costs since each business unit may, for
example, have its own purchasing department.
17) Which of the following is not one of the IMA’s credibility standards?
A) To disclose all relevant information
B) To disclose deficiencies in internal control
C) To communicate information fairly and objectively
D) All of the above are part of IMA’s credibility standard
18) Hickory Point Amusement Park sells admission tickets for $50 per person for one
visit. Variable costs are $15 per visitor and fixed costs are $60,000,000 per month. The
company’s relevant range extends to 2,000,000 visitors per month. What is Hickory
Point’s projected operating income if 1,750,000 visitors come to the park during the
month?
A) $1,250,000
B) $61,250,000
C) $87,500,000
D) $27,500,000
19) 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 inventory turnover for the current year?
A) 15.75 times
B) 42.00 times
C) 25.00 times
D) 24.67 times
20) The ________ budget is part of the operating budgets.
A) capital expenditure
B) budgeted balance sheet
C) production
D) cash
21) If 120,000 units are produced, total costs are $343,000. Total fixed costs for Blue
Peace Inc. are $175,000. The variable cost per unit is
A) $4.32/unit
B) $1.46/unit
C) $2.86/unit
D) $1.40/unit
22) Rustic Living Furniture Company manufactures furniture at its central Kentucky
factory. Some of its costs from the past year include:
Product costs for Rustic Living Furniture Company totaled
A) $203,500
B) $273,500
C) $297,500
D) $295,000
23) Rustic Living Furniture Company manufactures furniture at its central Kentucky
factory. Some of its costs from the past year include:
Direct material costs for Rustic Living Furniture Company totaled
A) $15,000
B) $26,000
C) $23,000
D) $8,000
24) Assume the Air Conditioning division of the General Appliance Corporation had the
following results last year (in thousands). Management’s target rate of return is 15% and
the weighted average cost of capital is 10%. Its effective tax rate is 35%.
What is the division’s sales margin?
A) 80.00%
B) 32.80%
C) 20.00%
D) 400.00%
25) The process of choosing among different alternative investments due to limited
resources is referred to as
A) capital investing
B) capital rationing
C) resource rationing
D) resource allocation
26) All of the following would be considered a company with high operating leverage,
except
A) retailer
B) golf course
C) theme park
D) hotel
27) What are the three elements of the “triple bottom line”?
A) Profit, people, and planet
B) Profit, product, and process
C) Property, plant, and equipment
D) Planet, product, and people
28) Pablo was reviewing the water bill for his carwash business and determined that the
highest bill, $5,000, occurred in July when 2,200 cars were washed and the lowest bill,
$3,200, occurred in February when 1,400 cars were washed. What was the fixed portion
of the water bill?
A) $3,600
B) $3,150
C) $4,100
D) $50
29) The cost of direct labor used in production is recorded as a
A) credit to manufacturing overhead
B) credit to work in process inventory
C) credit to wages expense
D) credit to wages payable
30) In pricing a product, managers should consider which of the following?
A) Only fixed costs
B) Only variable costs
C) Only period costs
D) None of the above
31) Which of the following items is not used when calculating the cost of goods
manufactured?
A) Direct materials used
B) Direct labor
C) Salesperson salaries
D) Manufacturing overhead
32) Spruce Company uses a job costing system. Spruce Company’s schedule of cost of
goods manufactured showed the following amounts for the month ended August 31 .
Allocated manufacturing overhead costs for August amount to $44,000.
What is the amount of work in process inventory (before any adjustment for over
allocated or under allocated manufacturing overhead) on August 31?
A) $29,500
B) $162,000
C) $52,500
D) $138,500
33) The performance evaluation of cost centers is typically based on which of the
following?
A) Sales volume variance
B) Flexible budget variance
C) Return on investment (ROI)
D) Return on assets (ROA)
34) When management analyzes whether to move production to another country or to
keep the production located where it currently is, which of the following management
responsibilities is being performed?
A) Adjusting
B) Controlling
C) Planning
D) Directing
35) The selling price of a particular product is $38.00 per unit, fixed costs total
$175,000, and the breakeven sales in dollars is $875,000, what will the variable expense
per unit be?
A) $152.00
B) $7.60
C) $45.60
D) $30.40
36) A job costing system can be used by which types of companies?
A) Manufacturing and merchandising businesses
B) Service and manufacturing businesses
C) Service, manufacturing, and merchandising businesses
D) Service and merchandising businesses
37) Wallace Incorporated sells its products for $520 per unit. Variable costs are
currently 45% of sales revenue. Fixed expenses are $125,840 per year.
What is the breakeven point in units at the current selling price?
A) 167 units
B) 286 units
C) 440 units
D) 538 units
38) Mountaintop golf course is planning for the coming season. Investors would like to
earn a 12% return on the company’s $45 million of assets. The company primarily
incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be
$20,000,000 for the golfing season. About 400,000 golfers are expected each year.
Variable costs are about $15 per golfer. Mountaintop golf course is a price-taker and
won’t be able to charge more than its competitors who charge $75 per round of golf.
What profit will it earn as a percent of assets?
A) Loss of 8.89%
B) Profit of 35.56%
C) Profit of 8.89%
D) Loss of 57.67%
39) Loyal Pet Company expects to sell 5,000 beefy dog treats in January and 9,000 in
February for $3 each. What will be the total sales revenue reflected in the sales budget
for those months?
A) January $15,000; February $27,000
B) January $1,667; February $3,000
C) January $3,000; February $1,667
D) January $27,000; February $15,000
40) Which term below best describes the quality cost category for “lost profits from lost
sales”?
A) Prevention costs
B) Appraisal costs
C) External failure costs
D) Internal failure costs
41) The ________ is the hourly price charged to clients for professional labor.
A) salary rate
B) billing rate
C) wage rate
D) job rate
42) Fixed costs that continue to exist even after a product line is discontinued are called
A) unavoidable fixed costs
B) avoidable fixed costs
C) variable fixed costs
D) relevant fixed costs
43) Goliath Company prepared the following purchases budget:
All purchases are paid for as follows: 30% in the month of purchase, 45% in the
following month, and 25% two months after purchase.
What are the total cash disbursements in August for the purchase of merchandise?
A) $45,330
B) $31,005
C) $39,905
D) $11,880
44) Managerial accountants are required to possess which of the following skills?
A) Analytical skills
B) Oral and written communication skills
C) The ability to work on a team
D) All of the above
45) A company uses the indirect method to prepare the statement of cash flows. It sold a
piece of land at a gain of $3,600. The equipment was purchased several years ago for
$70,500 and had accumulated depreciation of $52,900. What is reported under the
operating activities section on the statement of cash flows?
A) Cash proceeds of $21,200 are subtracted from net income
B) Cash proceeds of $21,200 are added to net income
C) The gain of $3,600 is added to net income
D) The gain of $3,600 is subtracted from net income