If fixed costs are $400,000 and the unit contribution margin is $20, what amount of
units must be sold in order to have a zero profit?
a. 25,000 units
b. 10,000 units
c. 400,000 units
d. 20,000 units
In determining cost of goods sold, two alternate costing concepts can be used: direct
costing and variable costing.
a. True
b. False
Comparing dividends per share to earnings per share indicates the extent to which the
corporation is retaining its earnings for use in operations.
a. True
b. False
Penny, Inc. employs a process costing system. Direct materials are added at the
beginning of the process. Here is information about July’s activities:
Using the FIFO method and rounding cost per unit to four decimal places, the cost of
goods completed and transferred out during July was
a. $227,270
b. $225,060
c. $236,905
d. $228,200
Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 3 were $50,000, $60,000, and $70,000,
respectively. In addition, work in process at the beginning of the period for Department
3 totaled $75,000, and work in process at the end of the period totaled $60,000. The
journal entry to record the flow of costs into Department 3 during the period for direct
materials is
a. Work in Process’”Department 3 Materials 100,000
100,000
b. Work in Process’”Department 3 Materials 125,000
125,000
c. Work in Process’”Department 3 Materials 50,000
50,000
d. Work in Process’”Department 3 Materials 70,000
70,000
Given the following costs and activities for Dance Company electrical costs, use the
high-low method to calculate Dance’s variable electrical costs per machine hour.
a. $2.08
b. $6.00
c. $0.60
d. $1.20
Ruby Company produces a chair that requires 5 yards of material per unit. The standard
price of one yard of material is $7.50. During the month, 8,400 chairs were
manufactured, using 43,700 yards at a cost of $7.30 per yard.
Determine the (a) price variance, (b) quantity variance, and (c) total cost variance.
Zeus Company reports the following for the current year:
*Net of any tax effect
(a) Prepare a partial income statement for Zeus Company beginning with income from
continuing operations before income tax.
(b) Calculate the earnings per common share for Zeus, including per-share amount for
unusual items.
Using the variable cost concept, determine the selling price for 30,000 units using the
following data:
Variable cost per unit $15.00
Total fixed costs $90,000
Desired profit a. $10 $150,000
b. $15
c. $8
d. $23
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, what would be the internal rate of return of an investment that
required an investment of $227,460 and would generate an annual cash inflow of
$60,000 for the next 5 years?
a. 6%
b. 10%
c. 12%
d. cannot be determined from the data given
Number of employees
An activity base is used to charge service department expenses. Match the following
activity bases with the appropriate department (a-h).
a. Purchasing
b. Payroll accounting
c. Human resources
d. Maintenance
e. Information systems
f. Marketing
g. President’s Office
h. Transportation
Rent expense on a factory building would be treated as a(n)
a. period cost
b. product cost
c. indirect cost
d. direct material cost
Work in process inventory on December 31 is $42,000. Work in process inventory
decreased by 40% during the year. Total manufacturing costs incurred amount to
$260,000. What is the cost of goods manufactured?
a. $232,000
b. $302,000
c. $288,000
d. $190,000
Dollar amounts of working capital are difficult to assess when comparing companies of
different sizes or in comparing such amounts with industry figures.
a. True
b. False
A business operated at 100% of capacity during its first month, with the following
results:
Operating expenses:
What is the amount of the gross profit that would be reported on the absorption costing
income statement?
a. $21,000
b. $18,900
c. $27,900
d. $18,000
Which of the following items would not be classified as part of factory overhead?
a. direct labor used
b. amortization of manufacturing patents
c. production supervisors’ salaries
d. factory supplies used
The two categories of cost comprising conversion costs are
a. direct labor and indirect labor
b. direct labor and factory overhead
c. factory overhead and direct materials
d. direct labor and direct materials
A business operated at 100% of capacity during its first month and incurred the
following costs:
If 1,000 units remain unsold at the end of the month, what is the amount of inventory
that would be reported on the absorption costing balance sheet?
a. $38,000
b. $40,500
c. $34,000
d. $47,000
Budgetary slack can be avoided if lower and mid-level managers are requested to
support all of their spending requirements with specific operational plans.
a. True
b. False
Supervisor salaries, maintenance, and indirect factory wages would normally appear in
the factory overhead cost budget.
a. True
b. False
The formula to compute the direct material quantity variance is to calculate the
difference between
a. Actual costs ‘“ Standard costs
b. Standard costs ‘“ Actual costs
c. (Actual quantity × Standard price) ‘“ Standard costs
d. Actual costs ‘“ (Standard price × Standard costs)
Which of the following statements is correct using the direct costing concept?
a. All manufacturing costs are included in the calculation of cost of goods
manufactured.
b. Only fixed costs are included in the calculation of cost of goods manufactured while
variable costs are considered period costs.
c. Only variable manufacturing costs are included in the calculation of cost of goods
manufactured while fixed costs are considered period costs.
d. All manufacturing costs are considered period costs.
The following items were taken from the financial statements of Tilden, Inc., over a
three-year period:
Compute the following for each of the above time periods.
(a) The amount and percentage change from Year 2 to Year 3.
(b) The amount and percentage change from Year 1 to Year 2. Round percentages to one
decimal place.
