Which of the following results in long lead time?
a. long setup times
b. large batch sizes
c. large inventories
d. all of the above
Answer:
A business operated at 100% of capacity during its first month and incurred the
following costs:
If 1,500 units remain unsold at the end of the month, what is the amount of inventory
that would be reported on the variable costing balance sheet?
a. $62,500
b. $73,500
c. $60,000
d. $52,500
Answer:
When computing the rate earned on total common stockholders’ equity, preferred stock
dividends are subtracted from net income.
a. True
b. False
Answer:
The excess of current assets over current liabilities is referred to as working capital.
a. True
b. False
Answer:
Income from operations for Division H is $220,000, and income from operations before
service department charges is $975,000. As a result,
a. total operating expenses are $565,000
b. total manufacturing expenses are $565,000
c. direct materials, direct labor, and factory overhead total $565,000
d. total service department charges are $755,000
Answer:
Which of the following is a present value method of analyzing capital investment
proposals?
a. average rate of return
b. cash payback method
c. accounting rate of return
d. net present value
Answer:
On the variable costing income statement, deduction of the variable cost of goods sold
from sales yields gross profit.
a. True
b. False
Answer:
The Canine Company has total estimated factory overhead for the year of $2,400,000,
divided into four activities: fabrication, $1,200,000; assembly, $480,000; setup,
$400,000; and materials handling, $320,000. Canine manufactures two products,
Standard Crates and Deluxe Crates. The activity-base usage quantities for each product
by each activity are as follows:
Each product is budgeted for 20,000 units of production for the year. Determine (a) the
activity rates for each activity and (b) the factory overhead cost per unit for each
product using activity-based costing.
Answer:
Cost of goods manufactured is equal to
a. total manufacturing costs plus ending materials inventory less beginning materials
inventory
b. cost of goods sold plus beginning work in process inventory less ending work in
process inventory
c. total manufacturing costs plus ending work in process inventory less beginning work
in process inventory
d. total manufacturing costs plus beginning work in process inventory less ending work
in process inventory
Answer:
costs incurred in a previous process that are carried forward as part of the product’s cost
when it moves to the next department
Match each phrase that follows with the term (a-h) it describes.
a. direct labor and factory overhead
b. direct labor and direct materials
c. transferred in costs
d. equivalent units
e. process costing
f. job order costing
g. first-in, first-out method
h. cost of production report
Answer:
Which of the following would be most effective in a small owner/manager-operated
business?
a. profit centers
b. centralization
c. investment centers
d. cost centers
Answer:
Generally accepted accounting principles require companies to use only one factory
overhead rate for product costing.
a. True
b. False
Answer:
Contribution margin reporting and analysis is appropriate only for manufacturing firms,
not for service firms.
a. True
b. False
Answer:
An analysis of a proposal by the net present value method indicated that the present
value of future cash inflows exceeded the amount to be invested. Which of the
following statements best describes the results of this analysis?
a. The proposal is desirable and the rate of return expected from the proposal exceeds
the minimum rate used for the analysis.
b. The proposal is desirable and the rate of return expected from the proposal is less
than the minimum rate used for the analysis.
c. The proposal is undesirable and the rate of return expected from the proposal is less
than the minimum rate used for the analysis.
d. The proposal is undesirable and the rate of return expected from the proposal exceeds
the minimum rate used for the analysis.
Answer:
Department M had 600 units 60% completed in process at the beginning of June, 6,000
units completed during June, and 700 units 30% completed at the end of June. Using
the first-in, first-out method of inventory costing, what was the number of equivalent
units of production for conversion costs for the period?
a. 7,300 units
b. 5,640 units
c. 6,700 units
d. 5,850 units
Answer:
Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
Using the tables above, if an investment is made now for $23,500 that will generate a
cash inflow of $8,000 a year for the next 4 years, what would be the net present value
of the investment, assuming an earnings rate of 10%?
a. $23,500
b. $16,050
c. $25,360
d. $1,860
Answer:
The effects of differences in accounting methods are of little importance when
analyzing comparable data from competing businesses.
a. True
b. False
Answer:
Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices
are $55, $78, and $32, respectively. The variable costs for each product are $20, $50,
and $15, respectively. Each product must go through the same processing in a machine
that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales, 7 hours;
and Wales 1 hour.
What is the contribution margin per machine hour for Tales?
a. $4
b. $7
c. $28
d. $35
Answer:
Which of the following costs are not included in finished goods inventory?
a. direct labor
b. factory overhead
c. chief financial officer’s salary
d. direct materials
Answer:
Stryker Industries received an offer from an exporter for 15,000 units of product at
$17.50 per unit. The acceptance of the offer will not affect normal production or
domestic sales prices. The following data is available:
What is the differential revenue from the acceptance of the offer?
a. $300,000
b. $262,500
c. $52,500
d. $250,000
Answer:
Schedule of Activity Costs
From the above schedule, calculate the external failure costs.
Answer:
Explain why it is imperative that proper factory overhead be allocated in factories that
produce multiple products.
Answer:
Compute the direct materials price and quantity variances for Taylor Company.
The following data is given for the Taylor Company:
Overhead is applied based on standard labor hours.
Answer:
The sales, income from operations, invested assets, and residual income for each
division of Marcus Company are as follows:
Determine the minimum rate of return for invested assets.
Answer:
Racer Industries has fixed costs of $900,000. Selling price per unit is $250, and variable
cost per unit is $130.
(a) How many units must Racer sell in order to break even?
(b) How many units must Racer sell in order to earn a profit of $480,000?
(c) A new employee suggests that Racer Industries sponsor a 10K marathon as a form of
advertising. The cost to sponsor the event is $7,200. How many more units must be sold
to cover this cost?
Answer:
Differentiate between a line department and a staff department.
Answer:
The materials used by the Holly Company’s Division A are currently purchased from an
outside supplier. Division B is able to supply Division A with 20,000 units at a variable
cost of $42 per unit. The normal price that Division B normally sells its units is $53 per
unit. What is the range of transfer prices within which the two division managers should
negotiate?
Answer:
Douglas Company has a contribution margin ratio of 30%. If Douglas has $336,420 in
fixed costs, what amount of sales will need to be generated in order for the company to
break even?
Answer:
Describe a master budget and the sequence in which the individual budgets within the
master budget are prepared.
Answer:
Six selected transactions for the current month are indicated by letters in the following
T accounts in a job order cost
Describe each of the six transactions.
Answer: