Which of the following is not an external failure cost?
a. warranty work
b. processing returned merchandise
c. rework
d. correcting invoice errors
The average rate of return method of capital investment analysis gives consideration to
the present value of future cash flows.
a. True
b. False
The cost of wages paid to employees directly involved in converting materials to
finished product is classified as direct labor cost.
a. True
b. False
Past performance is the best overall basis for evaluating current performance and
assessing the need for corrective action.
a. True
b. False
The debits to Work in Process’”Assembly Department for April, together with data
concerning production, are as follows:
April 1, work in process:
All direct materials are added at the beginning of the process, and the first-in, first-out
method is used to cost inventories. The conversion cost per equivalent unit for April is
a. $2.48
b. $2.75
c. $2.50
d. $5.25
Unusual items affecting the current period’s income statement consist of changes in
accounting principles and discontinued operations.
a. True
b. False
Which of the following is an example of a cost that varies in total as the number of
units produced changes?
a. salary of a production supervisor
b. direct materials cost
c. property taxes on factory buildings
d. straight-line depreciation on factory equipment
Chicks Corporation had $1,100,000 in invested assets, sales of $1,210,000, income
from operations amounting to $302,500, and a desired minimum rate of return of 15%.
The residual income for Chicks is
a. $165,000
b. $302,500
c. $137,500
d. $191,500
Keating Co. is considering disposing of equipment that cost $50,000 and has $40,000 of
accumulated depreciation to date. Keating Co. can sell the equipment through a broker
for $25,000 less 5% commission. Alternatively, Gunner Co. has offered to lease the
equipment for five years for a total of $48,750. Keating will incur repair, insurance, and
property tax expenses estimated at $8,000 over the five-year period. At lease-end, the
equipment is expected to have no residual value. The net differential income from the
lease alternative is
a. $17,000
b. $7,000
c. $27,000
d. $14,500
Sifton Electronics Corporation manufactures and assembles electronic motor drives for
video cameras. The company assembles the motor drives for several accounts. The
process consists of a lean cell for each customer. The following information relates only
to one customer’s lean cell for the coming year. Projected labor and overhead,
$7,370,000; materials costs, $28 per unit. Planned production included 4,000 hours to
produce 27,500 motor drives. Actual production for August was 1,600 units, and motor
drives shipped amounted to 1,380 units.
From the foregoing information, determine the amount of the conversion costs charged
to Raw and In Process Inventory during August.
a. $369,840
b. $408,480
c. $428,800
d. $473,600
Movie studio
Match each business that follows to the type of costing system (a or b) it would
typically use.
a. Job order costing
b. Process costing
Which of the graphs in Figure 21-1 illustrates the behavior of a total fixed cost?
Figure 21-1
a. Graph 2
b. Graph 3
c. Graph 4
d. Graph 1
Recognizes that a dollar today is worth more than a dollar tomorrow
Match the definition that follows with the term (a’“e) it defines.
a. Capital investment analysis
b. Time value of money concept
c. Net present value method
d. Average rate of return
e. Cash payback period
Average rate of return equals estimated average annual income divided by average
investment.
a. True
b. False
A company is preparing its cash budget. Its cash balance on January 1 is $290,000 and
it has a minimum cash requirement of $340,000. The following data has been provided:
What is the amount of cash excess or deficiency (after considering the minimum cash
balance required) for March?
a. excess of $214,200
b. excess of $15,800
c. deficiency of $60,000
d. excess of $25,300
Which of the following is not true in regards to direct materials for a bakery?
a. Flour and sugar would probably be direct materials.
b. Eggs would probably be a direct material
c. Oil to lubricate factory machines would not be a direct material.
d. Paper cupcake liners, that become part of the product, must be accounted for as direct
materials.