In a job-order system, which of the following statements is TRUE?
A) The Work-in-Process Inventory account is increased by the actual factory overhead
costs incurred for a job.
B) The Work-in-Process Inventory account is increased by the applied factory overhead
costs for a job.
C) The Work-In-Process Inventory account is decreased by the budgeted amount of
factory overhead costs for a job.
D) The Work-In-Process Inventory account is increased by the budgeted amount of
factory overhead costs for a job.
The following information pertains to the West Division of Burger Company:
Net sales $6,000
Variable costs:
Cost of merchandise sold 1,000
Operating expenses 450
Fixed costs:
Controllable by segment manager 1,600
Controllable by others 1,250
Unallocated costs 750
The contribution margin of the West Division is ________.
A) $2,750
B) $3,650
C) $4,350
D) $4,550
In net present value analysis, the minimum desired rate of return for an investment
project depends on the ________ of a proposed project.
A) expected return
B) desired return
C) risk
D) payback period
Medved Company reported the following information about the production and sale of
its only product during the first month of operations:
Selling price per unit $225.00
Sales $315,000
Direct materials used $160,000
Direct labor $100,000
Variable factory overhead $60,000
Fixed factory overhead $80,000
Variable selling and administrative expenses $20,000
Fixed selling and administrative expenses $30,000
Production volume variance 0
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 600 units
Under absorption costing, what is the cost of the ending inventory of finished goods?
A) $78,000
B) $96,000
C) $120,000
D) $135,000
The first step in regression analysis is to plot the cost data against each potential cost
driver because the plots may show ________.
A) nonlinear trends in the data only
B) outliers only
C) nonlinear trends in the data and outliers
D) missing cost data
If the Machining Department is the cost object, attaching costs to the Machining
Department is called ________.
A) cost pooling
B) cost accumulation
C) cost assignment
D) applying a cost driver
In an efficient capital market, the appropriate investment strategy is risk control,
________ and ________.
A) low diversification; high turnover of securities
B) low diversification; low turnover of securities
C) high diversification; high turnover of securities
D) high diversification; low turnover of securities
Why are more organizations adopting activity-based costing systems?
A) Computer technology has increased the costs of developing and operating ABC
systems.
B) Indirect costs are more important in automated manufacturing environments.
C) Less competition.
D) Less diversity in product mix offered to customers.
The following information is available for the Stanley Company:
Sales for year $1,000,000
Average invested capital for year $312,500
Return on investment 20%
What is the operating income?
A) $62,500
B) $100,000
C) $312,500
D) $687,500
How should Unearned Rent Revenue be classified on a balance sheet at December 31,
2013? The rental contract covers the period, January 1, 2013 through December 31,
2015.
A) current liability only
B) long-term liability only
C) current and long-term liability
D) current asset only
Depreciation expense is recorded for ________.
A) equipment and land
B) land and buildings
C) equipment and buildings
D) equipment, land and building
On May 1, Gomez Company paid $36,000 for rent. The rent covers the period May 1
through August 31. Gomez Company recorded Prepaid Rent of $36,000. What is the
balance in the Prepaid Rent account on June 1?
A) $0
B) $9,000
C) $18,000
D) $27,000
Nicholson Company uses job order costing. Supporting documents for the
Work-In-Process Inventory account do NOT include ________.
A) labor time tickets
B) time cards
C) materials requisition forms
D) schedule of actual factory overhead costs
A company is considering whether to change the mix of products sold. They think it
would be more profitable to emphasize the products with the highest profit per unit.
What type of information is needed to answer this question?
A) scorekeeping
B) attention directing
C) problem-solving
D) internal auditing
Sanders Company had the following data for the year ending December 31, 2014:
Cash $6,000
Depreciation expense 40,000
Prepaid rent 1,400
Cost of goods sold 69,000
Sales 200,000
Dividends paid 3,000
Rent expense 3,600
Wage expense 81,000
What is the net income for the year ending December 31, 2014?
A) $400
B) $3,400
C) $6,000
D) $6,400
Why do companies use variable costing for internal financial statements?
A) Production volume variance does not affect variable costing income but it does
affect absorption costing income.
B) Variable costing does not create an incentive to produce additional unneeded units to
increase net income.
C) A sales-oriented company wants to track the effect of sales on net income.
D) All of the above
The Banks Company makes mugs for which the following standards have been
developed:
Standard Inputs Expected Standard Price Expected
For Each Unit of Output Per Unit of Input
Direct Materials 5 ounces $2 per ounce
Direct Labor 1.5 hours $8 per hour
Production of 400 mugs was expected in July, but 440 mugs were actually completed.
Direct materials purchased and used were 2,100 ounces at an actual price of $2.30 per
ounce. Direct labor cost for the month was $5,310, and the actual pay per hour was
$9.00. What is the direct labor quantity variance for July?
A) $560 Favorable
B) $560 Unfavorable
C) $630 Favorable
D) $630 Unfavorable
Donahue currently produces 120,000 units at a cost of $400,000. Of the $400,000 cost,
$200,000 is a fixed cost. Next year Donahue expects to produce 145,000 units.
Donahue’s relevant range for production activities is 100,000 to 150,000 units. If
145,000 units are produced next year, what is the expected fixed cost for next year?
A) $200,000
B) $241,667
C) $441,667
D) $483,333
On April 1, 2012, Company X lends $200,000 to Company Y on a 8% note. On April 1,
2012, which of the following accounts of Company X will be affected by this
transaction?
A) Cash and Note Payable
B) Cash and Note Receivable
C) Cash and Interest Revenue
D) Cash and Interest Expense
A budget prepared for one expected level of activity is called a ________.
A) flexible budget
B) static budget
C) variable budget
D) rolling budget
Process maps are used ________.
A) to make investment decisions regarding capital assets
B) as a guide for strategic decisions
C) as a tool for managers to understand operations
D) for operational control
In order to estimate cost functions using account analysis, users rely on the ________
for information about cost behavior.
A) management audit
B) performance report
C) value chain
D) accounting system
A plant asset with a book value of $200,000 is sold for $150,000. The applicable tax
rate is 40%. What is the tax effect of the loss on sale?
A) $20,000 cash outflow
B) $20,000 cash inflow
C) $30,000 cash inflow
D) $170,000 cash inflow
Santelle Company expects August sales to be $30,000. Approximately 40% of sales are
cash sales. Collection of credit sales are 50% in the month of sale, 40% in the month
following sale and 5% two months following sale. The remaining 5% is uncollectible.
________ is the expected cash collection in August from August sales.
A) $9,000
B) $12,000
C) $21,000
D) $36,000
________ information helps managers focus on operating problems, imperfections,
inefficiencies and opportunities.
A) Scorekeeping
B) Attention directing
C) Problem solving
D) Performance
Old equipment having a book value of $12,000 was sold for $20,000 cash. New
equipment was purchased for $25,000 cash. Additional equipment was acquired in
exchange for a $17,000 long-term note payable. The net cash flow from investing
activities was ________.
A) $5,000 cash outflow
B) $22,000 cash outflow
C) $25,000 cash outflow
D) $42,000 cash outflow
The financial ratios for a company can be evaluated using ________.
A) time-series comparisons
B) benchmark comparisons
C) cross-sectional comparisons
D) all of the above
The production volume variance is a line item on the ________ income statement.
A) contribution approach
B) variable costing
C) absorption costing
D) absorption costing and variable costing
The IMA’s ethical standard of confidentiality does NOT require each member to
________.
A) keep information confidential except when disclosure is authorized or legally
required
B) inform all relevant parties regarding appropriate use of confidential information
C) refrain from using confidential information for unethical or illegal advantage
D) provide confidential decision support information and recommendations that are
accurate, clear, concise and timely
In process costing, units that are started but NOT completed by the end of the
accounting period are called ________.
A) Cost of Goods Sold
B) ending Direct Materials Inventory
C) ending Work-In-Process Inventory
D) ending Finished Goods Inventory
Arizona Company has the following information available for the month of April:
Sales $100,000
Cost of goods sold $60,000
Interest expense $2,000
Income tax expense $1,000
Wages expense $12,000
Dividends declared $3,000
Equipment purchased $20,000
Rent expense $4,000
The company uses the accrual basis of accounting. What is the net income for the
month of April?
A) $21,000
B) $22,000
C) $24,000
D) $27,000
