1) In a company that uses the direct method to prepare the statement of cash flows, the
amount of cash it pays in interest expense is computed as
A) the change in interest payable plus interest expense.
B) the change in interest payable minus interest expense.
C) the ending interest payable balance plus interest expense.
D) the ending interest payable balance minus interest expense.
2) Johnson Trucking Company wants to determine a fuel surcharge to add to its
customers’ bills based on the number of miles driven to each area. It wants to separate
the fixed and variable portion of the truck’s operating costs so it has a better idea of how
distance affects these costs. Johnson Trucking Company has the following data
available.
Using the high-low method, the monthly operating costs if Johnson Trucking Company
drives 20,000 miles in a month will be
A) $28,650.
B) $10,500.
C) $25,500.
D) $15,000.
3) The managerial accountant at Aquatics Pools and Spas assess a fixed overhead
budget variance of $3,400 U in the month of April. The standard hours in April were
2,900 hours and the standard rate was projected at $13 per machine-hour. There were
unforeseen complications that involved raw materials and the standard rate projected
per machine hour-was inaccurate. What was the standard rate per-machine hour if the
standard fixed overhead cost of production is $41,100? What is the budgeted fixed
overhead amount if the actual fixed overhead is $43,100?
A) $14.17 /machine hour; $39,700
B) $13.86 /machine hour; $44,500
C) $14.15 /machine hour; $46,500
D) $12.15 /machine hour; $40,200
4) The following data relate to Austin Corporation for last year:
What is the net cash provided by operating activities for last year on the statement of
cash flows for Austin Corporation?
A) $165,000
B) $123,000
C) $169,000
D) $137,000
5) Cartman Enterprises management has budgeted the following amounts for its next
fiscal year:
If Cartman Enterprises can reduce fixed expenses by $16,000, how will breakeven sales
in units be affected?
A) Increase by 400 units
B) Increase by 1,600 units
C) Decrease by 400 units
D) Decrease by 1,600 units
6) Use the following information to do a horizontal analysis of Marcus Corporation’s
income statement for the current year and prior year:
What is the percentage change in net income?
A) 78.00%
B) -22.00%
C) 16.73%
D) 35.59%
7) The managerial accountant at Sellers Manufacturing produces a product, Part Z that
the company uses to make multiple products at its facility in Virginia. The managerial
accountant reported to the operations manager that 12% of its fixed overhead costs
assigned to Part Z will not continue if Sellers Manufacturing outsources the production
of Product Z at $44 per unit to Manufacturing World. The managerial accountant
reported that to produce 1,200 units of Product Z, Sellers Manufacturing incurs the
following costs:
Should Sellers Manufacturing produce Part Z or outsource it to Manufacturing World?
8) Monroe Manufacturing produces and sells a product with a price of $100/unit. The
following data has been prepared for its estimated upper and lower levels of activity.
The only variable expenses for this company are
A) indirect materials, direct materials, and direct labor.
B) all categories of selling and administrative expenses.
C) indirect materials, indirect labor, direct materials, and direct labor.
D) none of the above.
9) A company uses the direct method to prepare the statement of cash flows. It presents
the following data on its financial statements:
*Relates solely to the acquisition of inventory
Which of the following is correct about accounts payable transaction in the operating
activities category in the statement of cash flows?
A) The increase of $10,000 will be subtracted from net income.
B) The increase of $10,000 will be added to net income.
C) The increase of $10,000 will be added to purchases to determine payments to
suppliers.
D) The increase of $10,000 will be subtracted from purchases to determine payments to
suppliers.
10) The following data pertain to costs at Summit Company:
The fixed cost per unit is
A) $3.75.
B) $15.00.
C) $18.75.
D) $11.25.
11) Which of the following cost of quality categories represent the cost incurred to seek
and find a new supplier that can provide quality raw materials compared to the
low-quality raw materials received from a current supplier?
A) Prevention costs
B) Appraisal costs
C) Internal failure costs
D) External failure costs
12) The managerial accountant at Right Stripes T-Shirt Company reported the following
information:
How many units did Right Stripes T-Shirt Company sell to achieve the above listed
revenue? Compute the company’s contribution margin.
A) 95 units; $1.67
B) 950 units; $7,030
C) 7.5 units; $28,120
D) 750 units; $7,030
13) Use the indirect method of preparing a statement of cash flows to answer the
question.
Ending balances for Sunday Hut are listed below:
Net income for this year was $97,000 and dividends of $24,000 were declared and paid
during this year.
What was the net cash provided by financing activities?
14) Explain the type of inventory that is characteristic at a service company.
15) The managerial accountant at Red Ribbon Distribution Company prepared a report
in the previous quarter and reported 4,200 actual machine hours were used. The actual
rate per machine hour was $32.75 while the standard rate was $28.50. The standard
hours allowed was calculated at 4,000. Compute the variable manufacturing overhead
(MOH) rate variance to determine the accuracy of the forecasted MOH and, the
variable MOH efficiency variance, to determine whether the volume of output was
consistent with the number of machine hours used.
16) Standard Products Company recognizes variances from standards at the earliest
opportunity, and the quantity of direct materials purchased is equal to the quantity used.
The following information is available for the most recent month. Assume the
allocation base for fixed overhead costs is the number of units.
Journalize the allocation of overhead costs to Work in Process Inventory and closing
manufacturing overhead costs to overhead variances.
17) Miller Manufacturing Corporation has the following information regarding direct
materials:
Compute Miller’s Standard Price (SP) per pound and Actual Price (AP) per pound of
direct materials.
18) The managerial accountant at Matheson Tool Company is compiling a fixed
overhead volume variance report. According to the data, 4,200 standard hours were
tallied at $8 per machine hour, the fixed overhead volume variance was calculated at
$2,860 U. Compute the budgeted fixed overhead cost at $2,860U and compare the
budgeted fixed overhead cost if the fixed overhead volume variance was $2,860F.