Absorption costing is also referred to as full costing.
Identifying whether a measure is a leading or lagging indicator can be difficult, because
a lagging indicator of one event can be a leading indicator of another.
Probably the most common measure of short-term liquidity is the quick ratio.
In a predictable decision, a proposed project is compared to a performance benchmark
to determine whether the project should be considered further.
In preparing a common-size balance sheet, you express all asset account balances as a
percentage of cash.
Customer-level activities and the resources consumed to perform them do not affect
product costs.
Raising prices for unprofitable customers is a reflection of the cost of doing business
with them.
The journal entries used to record cost flows in a process costing system are the same as
those used to record cost flows in a job order costing system.
Managerial accounting is designed to assist managers with four general activities:
planning, controlling, evaluating, and decision making.
When a variable overhead efficiency variance is identified, managers will want to talk
with the production manager to evaluate the use of the activity base.
Costs such as rent and the production manager ‘s salary are non-differential, but are
relevant.
When preparing the statement of cash flows using the indirect method, losses from
investing activities are deducted from net income to arrive at cash flows from operating
activities.
Absorption costing is also referred to as variable costing.
In determining whether or not to eliminate a segment, differential costs are relevant to
the decision.
To calculate the present value of an annuity, divide the amount to be received each year
by the present value factor.
James Bruce is the CEO of Bruce Industries. James is interested in purchasing new
pollution abatement equipment because the current equipment is outdated and not
efficient. The controller of the company has identified equipment that costs $104,110
and will provide annual cash operating inflows of $28,290 for 5 years. The equipment
currently being used is 3 years old and could be sold for $2,130. What is the
equipment’s internal rate of return?
a. 8%
b. 10%
c. 12%
d. 15%
The organizational structure in which decision-making authority is dispersed
throughout the organization is called
a. Centralized.
b. Decentralized.
c. Divisional stability.
d. Segmented decision making.
Two types of return can be expected from investment in long-term assets:
a. Positive contribution margin and positive segment margin.
b. Interest and dividends.
c. Return of investment and return on investment.
d. None of these answer choices are correct.
Which of the following would be the most appropriate cost driver for the purchasing
department?
a. Number of orders placed
b. Direct labor hours
c. Machine hours
d. Direct labor cost
Which of the following is a similarity between job order costing and process costing
systems?
a. Both accumulate product costs throughout the production process and assign those
costs to individual units of production
b. Both accumulate direct materials, direct labor, and manufacturing overhead costs
c. Both track cost flows from raw materials to work in process, from work in process to
finished goods, and from finished goods to cost of goods sold
d. All of these answer choices are similarities between job costing and process costing
systems
Bowen is considering the purchase of equipment costing $150,000. The equipment has
a 12- year useful life and will generate $25,000 in annual cash flows. The company has
a 10% required rate of return and uses the straight-line depreciation method. The
accounting rate of return on this equipment is closest to
a. 1.6%
b. 8.3%
c. 10%
d. 25%
At the beginning of the year, managers at King Industries estimated $420,000 in
manufacturing overhead, 20,000 direct labor hours and 50,000 machine hours. Actual
manufacturing costs at the end of the year were $425,000 in manufacturing overhead.
During the year 22,000 direct labor hours and 47,000 machine hours were incurred. If
overhead is applied based on direct labor hours, what is the predetermined overhead
rate for the coming year?
a. $19.09 per direct labor hour
b. $20.00 per direct labor hour
c. $21.00 per direct labor hour
d. $21.25 per direct labor hour
The direct materials quantity variance is part of the direct materials flexible budget
variance that is caused by
a. Using more or less material than the standard quantity allowed for actual production.
b. Applying too much overhead to production.
c. Having too much inventory in the storeroom.
d. None of these answer choices are correct.
In a preference decision, which of the following criteria might be used to rank-order the
projects?
a. Rate of return
b. Return on investment
c. Expected opportunities in new market niche
d. All of these answer choices are correct.
As non-value-added activities and their associated resources are eliminated, a
company’s
a. Costs will decrease.
b. Fixed costs will be eliminated.
c. Variable costs will increase.
d. None of these answer choices are correct..
Integrated purchases and cash payments budget’ƒSenegalese Specialties, a retailer of
West African food products, has completed the sales forecast for the coming year:
Senegalese Specialties maintains an ending inventory level of 60 percent of the
following month ‘s cost of goods sold. The company ‘s cost of goods sold is 35 percent
of sales. Required: a. Prepare Senegalese Specialties purchases budget for June and
July. Use the following format: Budgeted sales dollars
x Cost of goods sold percentage
= Cost of goods sold
+ Ending inventory
= Total inventory required
-Beginning inventory
= Budgeted purchases b. Assuming that Senegalese Specialties pays for 50 percent of
its purchases in the month of purchase and the remaining 50 percent in the month
following the purchase, prepare the company ‘s cash payments budget for July.
Qualitative indicators tend to be based on
a. Feelings or accounting records.
b. Feelings or perceptions.
c. Accounting records or perceptions.
d. None of these answer choices are correct.
When using the balanced scorecard to monitor performance, the financial perspective
answers which of the following questions?
a. How do investors see us?
b. Are we reaching our financial goals?
c. Both how do investors see us? and Are we reaching our financial goals?
d. Neither How do investors see us? nor Are we reaching our financial goals?
Phillip Co. manufactures decorative pillows designed for use on outdoor patios. Phillip
requires that 30 percent of next month ‘s sales be on hand at the end of each month. The
following information is available regarding budgeted sales of pillows:
What is budgeted production for April?
a. 30,000
b. 34,200
c. 43,200
d. 21,000
Suppose your cell phone company offers a plan under which you pay $15 for a
100-minute block. For each minute over 100 minutes you have to pay $0.10 per minute.
This is an example of a
a.Variable cost
b.Mixed cost.
c.Fixed cost.
d.Step cost.
Colorado Furniture Company manufactures naturally-weathered reclaimed wood
furniture. A queen-size bed sells for $1,800 and variable costs total $1,080. Colorado
incurs $300,000 in fixed costs during the year. The company’s tax rate is 20%.
Required:
How many queen-size beds must Colorado sell to generate net income of $400,000?
Determine the effects of changes in sales price, cost, and volume on operating income.
Countless measures could be captured and reported to managers. The best measures
relate to corporate strategy and are SMART.
Required:
Explain the five components of SMART and give an example of each component.
The following information relates to the 2014 operations of Adler’s Company.
a. What is Adler’s cost of goods manufactured for the period?
b. What was Adler’s cost of goods sold for the period?
Jerry Mounds, controller for Pearl Distributing, has prepared the following financial
information for the most recent period showing profitability the of its three departments
:
The factory rent of $3,200 assigned to Department C is avoidable if the department is
eliminated. Depreciation will remain unchanged if a department is dropped.
Discontinuing Department C will reduce the utilities by $600.
Required:
Prepare an analysis showing whether Department C should be eliminated.
On the breakeven graph, the point at which the total sales revenue line and the total cost
line intersect is the breakeven point.
The first step in developing a balanced scorecard is to clarify the strategic focus. As part
of the process, many organizations develop a strategy map. You have been assigned to a
team that has the responsibility to develop a strategy for your organization. Your team
members have determined that the company has established several strategic focuses.
One team member has started a strategy map, but has not filled in the strategies.
ï€ Achieve operational excellence
ï€ Develop trained workforce
ï€ Infuse corporate culture of quality throughout workforce
ï€ Develop reputation for quick turnaround
ï€ Retain and grow customer base
ï€ Manage customer relationships
ï€ Increase profit
Required:
Complete the strategy map using the four balanced scorecard perspectives.
What items increase the following accounts: Raw Materials Inventory, Work in Process
Inventory, Finished Goods Inventory, Manufacturing Overhead, and Cost of Goods
Sold?
Answer:Raw Materials Inventory is increased with the
purchase of materials.
Work in Process Inventory is increased as direct material and direct labor is added to the
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