In a manufacturing company, product costs used for external reporting include
________.
A) direct material costs plus direct labor cost only
B) indirect production costs only
C) direct material costs plus direct labor cost plus indirect production costs
D) direct material costs plus nonproduction costs
John Company has the following information:
Income tax rate 40%
Selling price per unit $7.50
Variable cost per unit $2.50
Total fixed costs $100,000
Target after-tax net income $42,000
Assume the tax rate decreases to 30%. How many fewer units can be sold to retain the
same after-tax net income of $42,000?
A) 1,000
B) 2,000
C) 32,000
D) 34,000
In job-order costing, a Debit to Direct Materials Inventory is used to record ________.
A) a requisition of direct materials for production
B) cost of goods completed
C) a sale of goods
D) a purchase of direct materials
In considering whether to produce a single product, the associated direct materials and
direct labor costs would probably be ________.
A) relevant qualitative factors
B) relevant quantitative factors
C) irrelevant qualitative factors
D) irrelevant quantitative factors
Key Company has a targeted sales volume of 62,300 units. Total fixed costs are
$31,200. The contribution margin per unit is $1.20. What is targeted net income?
A) $31,200
B) $37,440
C) $43,560
D) $74,760
Which of the following purposes of cost allocation provides information for operational
control in an organization?
A) to compute income and asset valuations for financial reports
B) to compute Cost of Goods Sold for financial reports
C) to determine the number of cost drivers for a product
D) to provide the desired motivation and to give feedback for performance evaluation
The McCain Company manufactures several products. The McCain Company has
gathered the following information for the year ended December 31, 2015:
Sales $110,000
Direct materials used $10,700
Fixed indirect production costs $10,900
Variable indirect production costs $7,900
Fixed direct labor $10,300
Variable direct labor $12,300
Fixed selling expenses $33,040
Variable selling expenses $3,440
Finished Goods Inventory, January 1, 2015 $24,000
Finished Goods Inventory, December 31, 2015 $22,000
Work-In-Process Inventory, January 1, 2015 0
Work-In-Process Inventory, December 31, 2015 0
Requirements:
A) Compute the Cost of Goods Manufactured for the year ended December 31, 2015.
B) Compute the Cost of Goods Sold for the year ended December 31, 2015.
C) Compute the Net Income for the year ended December 31, 2015.
What happens when the cost-driver level increases within the relevant range?
A) Total fixed costs remain unchanged.
B) Fixed costs per unit of cost driver increase.
C) Total variable costs decrease.
D) Variable costs per unit of cost driver increase.
The degree of operating leverage for Geesling Company is 8.0 at 80,000 units of sales.
At 80,000 units of sales, the net profit is $10,000. If the sales volume increases to
90,000 units, what is the net profit?
A) $12,000
B) $20,000
C) $22,222
D) $80,000
Fixed overhead costs that will continue regardless of a make-or-buy decision are
________ to the make-or-buy decision.
A) relevant
B) irrelevant
C) opportunity costs
D) incremental costs
The Institute of Management Accountants has adopted a set of standards for ethical
conduct which includes ________.
A) competence, integrity, confidentiality and objectivity
B) competence, confidentiality, credibility and objectivity
C) competence, confidentiality, credibility and integrity
D) competence, integrity, morality and confidentiality
Simon Inc. currently produces 110,000 units at a cost of $440,000. The cost is variable.
Next year Simon Inc. expects to produce 115,000 units. Simon’s relevant range for
production is 100,000 to 120,000 units. If 115,000 units are produced next year, what is
the expected variable cost?
A) $420,000
B) $430,000
C) $440,000
D) $460,000
In process costing, a company has some unfinished units at the end of the accounting
period. ________ units are the number of completed units that could have been
produced from the inputs used to create the unfinished units.
A) Physical
B) Convertible
C) Fully-complete
D) Equivalent
Source documents used in job-order costing include ________.
A) labor time tickets
B) material requisitions
C) time cards
D) all of the above
Which of the following is NOT an underlying assumption of cost-volume-profit
analysis?
A) We can classify expenses into fixed and variable categories.
B) In multiproduct companies, sales mix will be constant.
C) Revenues and expenses are linear over the relevant range.
D) The inventory level changes significantly during the period.
The various stages through which a product passes are called the ________.
A) value chain
B) product life cycle
C) performance plan
D) product performance plan
The computation for Cost of Goods Manufactured on the income statement is
________. (Assume there are no Work-In-Process Inventories.)
A) direct materials used plus direct production costs
B) direct materials used plus direct labor plus indirect production costs
C) direct materials used plus direct labor
D) direct materials used plus direct labor minus indirect production costs
Which stage of the product life cycle has a stable sales level?
A) product development stage
B) introduction to market stage
C) mature market stage
D) phase-out of product stage
Angelina Company manufactures plastic cups in one department. The following
information is available:
Work-In-Process Inventory, beginning 0
Units started 15,000
Units completed and transferred 12,000
Work-In-Process Inventory, end 3,000
Direct materials added $30,000
Direct labor $20,700
Factory overhead $10,350
The units in the ending Work-In-Process Inventory are 100 percent complete with
respect to direct materials and 60 percent complete with respect to conversion costs.
The cost of one completed unit is ________.
A) $4.07
B) $4.25
C) $4.42
D) $5.08
Differences between the actual results and the flexible budget at the actual level of
output achieved are ________ variances.
A) static budget
B) activity budget
C) flexible budget
D) operating budget
Which of the following items should be considered by managers when designing
accounting systems?
A) cost-benefit balances
B) behavioral implications
C) cost-benefit balances and behavioral implications
D) none of the above
Service departments in organizations exist to support ________.
A) other service departments and customers only
B) producing departments and suppliers only
C) other service departments, producing departments and customers
D) producing departments and customers only
Given below are the activities of the Tamara Company:
Credit sales $90,000
Cash sales $50,000
Cash collections from credit customers $36,000
Purchased inventory on account $27,000
Using the cash basis of accounting, the total revenues for Tamara Company are
________.
A) $56,000
B) $86,000
C) $90,000
D) $173,000
On January 1, 2014, Jeff Company purchased common stock in Garcia Company for
$1,000,000. Jeff Company treats the investment as available-for-sale securities. During
2014, Garcia Company earned $4,000,000 and paid dividends of $1,000,000. Assume
that Jeff Company owns 10% of the outstanding shares of Garcia Company. The market
value of the investment at December 31, 2014 is $1,100,000. What is the balance in the
Investment account at December 31, 2014?
A) $1,000,000
B) $1,100,000
C) $1,400,000
D) $1,500,000
Wetzel Company has the following information available for the past quarter:
Division A Division B Division C
Sales $250,000 $400,000 $350,000
Variable expenses 52% 30% 40%
Fixed expenses controllable by division manager $60,000 $200,000 $175,000
Fixed expenses controllable by others $10,000 $5,000 $7,500
Unallocated expenses for all three divisions are $22,000. What is the contribution
controllable by the division manager in Division C?
A) $5,500
B) $27,500
C) $35,000
D) $210,000
Which of the following statements about period costs is FALSE?
A) Period costs refer to distribution costs and design costs.
B) Period costs include R&D expenses, marketing costs and customer service costs.
C) Merchandising and manufacturing firms treat period costs differently.
D) For merchandising firms, Cost of Goods Sold is not a period cost.
Price elasticity measures the ________.
A) effect of sales volume changes on prices
B) effect of cost changes on prices
C) effect of price changes on sales volume
D) customers’ attitudes toward price changes
The ________ assumption implies that a company will continue to use existing
resources and pay existing liabilities at maturity in an orderly manner.
A) conservatism
B) relevance
C) going concern
D) materiality
John is a management accountant at DAP Inc. John has reason to believe that his
immediate supervisor (the controller), the chief financial officer and the company
president are engaged in accounting fraud that involves overstating assets and
understating liabilities. The company does not have a code of ethics or a set of policies
for ethical problems. According to the guidelines offered by the IMA, what should John
do?
A) Report the suspected wrongdoings to the local police.
B) Discuss the suspected wrongdoings with his immediate supervisor.
C) Discuss the suspected wrongdoings with the company president.
D) Report the suspected wrongdoings to the audit committee or the board of directors.
If the projected cost for a new product to be manufactured exceeds the target cost, what
measures can the company undertake to reduce the projected cost?
A) kaizen costing
B) value engineering
C) supplier negotiations
D) all of the above
Lisle Corporation has a joint process that produces three products: P, G and A. Each
product may be sold at split-off or processed further and then sold. Joint-processing
costs for a year amount to $25,000. The production level for each product is 10,000
units. Other data follows:
Sales Value Separable Processing Sales Value
Product at Split-Off Costs after Split-Off at Completion
P $12 $9 $21
G 10 3 17
A 15 6 19
Product G ________.
A) should be sold at split-off point to maximize profits
B) should be processed further to increase profits by $30,000
C) should be processed further to increase profits by $40,000
D) should be processed further to increase profits by $70,000