Under the immediate write-off method of disposing of underapplied or overapplied
overhead costs, current net income is ________ by underapplied overhead costs and
current net income is ________ by overapplied overhead costs.
A) increased, decreased
B) decreased, increased
C) not affected, not affected
D) none of the above
According to the IMA’s Statement of Ethical Professional Practice, the standard of
credibility includes ________.
A) continually developing the accountant’s knowledge and skills
B) mitigating actual conflicts of interest
C) disclosing all relevant information that could reasonably be expected to influence an
intended user’s understanding of the reports
D) refraining from engaging in any conduct that would prejudice carrying out duties
ethically
Under variable costing, fixed manufacturing overhead costs are a ________ cost. Under
absorption costing, fixed manufacturing overhead costs are a ________ cost.
A) product, period
B) period, product
C) product, product
D) period, period
Stanley Company applies overhead based on machine hours. The following data was
available:
Budgeted factory overhead costs $280,000
Budgeted machine hours 20,000
Actual factory overhead costs $292,000
Actual machine hours 19,050
Cost of goods sold $560,000
Direct materials inventory, ending balance $60,000
Work-in-process inventory, ending balance $190,000
Finished goods inventory, ending balance $250,000
Required:
A) Compute the budgeted factory overhead rate.
B) Compute the underapplied or overapplied factory overhead.
C) Under the immediate write-off approach to overhead variances, how would you
dispose of the overhead variance?
D) If the immediate write-off approach to overhead variances is not used, how would
you dispose of the overhead variance?
According to the Financial Executive, which of the following situations create pressures
for unethical behavior?
A) emphasis on long-term results
B) upward trends in the economy
C) ignoring small lapses in ethical behavior
D) rising stock prices
Illinois Company has budgeted the following costs for the production of its only
product:
Direct Materials $35,000
Direct Labor 25,000
Variable indirect production costs 30,000
Fixed indirect production costs 15,000
Variable selling and administrative costs 7,500
Fixed selling and administrative costs 12,500
Total Costs $125,000
Illinois Company has a target profit of $40,000. The company will produce 1,000 units.
The market price is $160 per unit. What is the target cost per unit?
A) $40
B) $120
C) $125
D) $165
Dooley Company has prepared the following sales budget:
Month Cash Sales Credit Sales
September $123,000 $210,000
October 140,000 200,000
November 167,000 260,000
December 189,000 190,000
Collections of credit sales are 50% in the month of sale, 40% in the month following
sale, and 10% two months following sale. No uncollectible accounts are expected. What
are the estimated cash collections in October from October sales?
A) $125,000
B) $140,000
C) $230,000
D) $240,000
Wininger Company has two departments. Relevant information is presented below:
Department 1 Department 2
Budgeted gross margin $100,000 $500,000
Actual gross margin $200,000 $600,000
Budgeted sales $500,000 $2,000,000
Actual sales $300,000 $2,100,000
Corporate management salaries are $3,000,000. The salaries are allocated based on
sales using the preferred approach. What amount of salaries is allocated to Department
1?
A) $300,000
B) $375,000
C) $600,000
D) $750,000
Each month Fig Company produces 11,000 units of a product that sells for $18 per unit,
and has variable costs of $12 per unit. Total fixed costs for the month are $77,000. A
special order is received for 5,000 units at a price of $14 per unit. Fig Company has
adequate capacity for the special order. If Fig Company accepts the special order, what
is the profit to Fig Company from the special order?
A) $0
B) $10,000
C) $22,000
D) $99,000
Division West does not have excess capacity to produce Product XX. The division can
sell Product XX for $10 per unit outside the company. Variable costs are $6 per unit.
Division East wants to purchase Product XX from Division West to use in Product ZZ.
The selling price of Product ZZ is $25 per unit and variable costs to finish the product
after the transfer are $12 per unit. An outside supplier will sell Product XX for $11 per
unit. What is the maximum price Division East will pay for Product XX?
A) $11 per unit
B) $12 per unit
C) $13 per unit
D) none of the above
Jerome Company has two service departments, Maintenance and Human Resources.
Jerome Company also has two production departments, Mixing and Finishing.
Maintenance costs are allocated based on square footage while Human Resource costs
are allocated based on number of employees. The following information has been
gathered for the current year:
Human
Maintenance Resources Mixing Finishing
Direct costs $126,000 $84,000 $105,000 $175,000
Square footage 800 400 1,600 1,200
Number of employees 8 12 24 32
If the direct method is used to allocate service department costs, then the total cost of
the Finishing Department after allocation would be ________.
A) $48,000
B) $102,000
C) $175,000
D) $277,000
Goldman Company has identified the following activities related to indirect production
costs:
Activity Activity Costs Cost Drivers
Machine Setup $180,000 1,500 setup hours
Materials Handling $50,000 12,500 pounds of materials
Electric Power $20,000 20,000 kilowatt hours
Goldman Company has obtained the following data concerning two products:
Product A Product B
Number of units produced 4,000 20,000
Direct materials cost $20,000 $25,000
Direct labor cost $12,000 $20,000
Number of setup hours 100 120
Pounds of materials used 500 1,500
Kilowatt-hours 1,000 2,000
Using activity-based costing, what is the total production cost per unit for Product A?
A) $8.00 per unit
B) $10.25 per unit
C) $11.75 per unit
D) $70.50 per unit
The South and North Divisions are divisions in the same company. Currently the North
Division buys a part from South Division for $384 per unit. The South Division wants
to increase the price of the part it sells to North Division by $96 to $480. The manager
of the North Division has stated that he cannot pay that much insofar as the division’s
profit goes below zero. The manager of the North Division can buy the part from an
outside supplier for $448 per unit. The cost data pertaining to the part is supplied by the
South Division:
Direct materials $136.00
Direct labor 200.00
Variable overhead 40.00
Fixed overhead 38.40
If South Division does not produce the parts for the North Division, it will be able to
avoid one-third of the fixed manufacturing overhead costs. The South Division has
excess capacity but no alternative uses for the facilities. North Division will sell the
finished product with the part (from South Division) for $1,000 after incurring
additional processing costs of $600. What is the maximum transfer price per unit that
North Division should pay for the part?
A) $388.80
B) $400.00
C) $448.00
D) $480.00
The financial budget is used by managers to ________.
A) manage financial affairs
B) manage employee hiring patterns
C) manage the cash balance
D) plan for future stock dividends
Paul Satorius is the controller at ANEW Corporation. The company is not publicly
traded. ANEW Corporation just received a patent on a new product that is supposed to
revolutionize the music industry. As the moment, however, ANEW Corporation is
experiencing financial difficulties and is on the verge of defaulting on a note held by the
bank.
At the end of the most recent fiscal year, the company’s president instructed Paul to
ignore recording some invoices. Paul objected because the invoices represented true
liabilities at fiscal year end. However, the president insisted that the invoices should be
recorded next year so that current liabilities reported on the balance sheet at the end of
the current year are lower. The bank is closely following the amount of current
liabilities reported by ANEW Corporation as an indicator of solvency.
Required:
What should Paul do? Follow the guidelines offered by the IMA.
California Company is considering two investments. The relevant data follows:
Project A Project B
Cost $205,010 $259,770
Annual cash savings(end of year) $50,000 $60,000
Terminal salvage value $0 $0
Estimated useful life in years 5 5
Minimum desired rate of return 10% 10%
Method of depreciation Straight-line Straight-line
Present Value Present Value
Of $1 of Ordinary
for 5 periods Annuity of $1
for 5 periods
5% 0.7835 4.3295
6% 0.7473 4.2124
7% 0.713 4.1002
8% 0.6806 3.9927
10% 0.6209 3.7908
12% 0.5674 3.6048
14% 0.5194 3.4331
Ignoring taxes, the internal rate of return for Project B is approximately ________.
A) 5%
B) 6%
C) 7%
D) 8%
Which credential is associated with management accountants?
A) CPA
B) CMA
C) CFP
D) IMA
The following data has been assembled for Mildred Company. Use the high-low
method.
Month Cost Hours
January $18,000 2,000
February $39,000 3,500
March $39,280 3,450
April $43,400 3,200
May $40,000 4,000
The variable cost per hour is ________.
A) $9.00
B) $10.00
C) $10.40
D) $11.00
The sales price is $30 per unit, the contribution margin is $8 per unit and total fixed
costs are $32,000. What is the break-even point in units?
A) 857
B) 1,200
C) 2,000
D) 4,000
On January 1, 2014, a parent company purchased 100 percent of the stock in a
subsidiary. On January 1, 2014, no goodwill was recorded and the book value of the
subsidiary’s assets equals the market value of the subsidiary’s assets. On December 31,
2014, the two companies report the following data:
Parent Company Net Income for Past Year $100 million
Subsidiary Company Net Income for Past Year $50 million
What is the consolidated net income for the year ended December 31, 2014?
A) $0
B) $50 million
C) $100 million
D) $150 million
The following information is available for Halquist Stone Company and its two
divisions, Crushed Stone and Fieldstone.
Whole Crushed
Company Stone Fieldstone
Net sales $100,000 $60,000 $40,000
Fixed costs controllable by
Division Manager 16,500 12,500 4,000
Fixed costs controlled by others 8,000 5,000 3,000
Variable costs:
Cost of merchandise sold 24,500 17,500 7,000
Operating expenses 16,400 10,000 6,400
Unallocated costs 1,000
What is the contribution controllable by the manager of the Crushed Stone Division?
A) $20,000
B) $32,500
C) $35,000
D) $42,500
A company has the following information available about one of its products:
Standard price per pound of input ?
Actual price per pound of input $27
Standard inputs per unit of output 3 pounds
Actual units of output 3,000
Direct Materials Price Variance $18,000 F
Actual pounds of input used 9,000
What is the standard price per pound of input?
A) $25
B) $27
C) $29
D) $33
Incremental costs are the ________ generated by a proposed alternative.
A) additional revenues
B) additional revenues or reduced costs
C) reduced costs
D) additional costs or reduced revenues
On March 1, a landlord received $10,000 rent for the month of April. On April 1, the
landlord will ________.
A) decrease Cash and increase Rent Revenue
B) decrease Cash and increase Unearned Rent Revenue
C) decrease Paid-in Capital and increase Interest Revenue
D) decrease Unearned Rent Revenue and increase Rent Revenue
The first step in preparing the master budget is the ________.
A) cash budget
B) capital budget
C) operating expense budget
D) sales budget
A department’s applied overhead cost will ________ equal the actual overhead cost
incurred.
A) always
B) never
C) about fifty percent of the time
D) rarely
Robertson Company has two production departments called Assembly and Finishing.
The maintenance department serves both production departments. Maintenance costs
are allocated based on labor hours. Budgeted fixed costs for the maintenance
department are $40,000. Budgeted variable costs for the maintenance department are
$4.00 per labor hour. Other relevant data follow:
Assembly Finishing
Capacity available 18,000 labor hours 12,000 labor hours
Capacity used 15,000 labor hours 9,000 labor hours
Actual maintenance department costs:
Fixed $36,000
Variable $100,000
The amount of fixed maintenance department costs allocated to the Finishing
Department should be ________.
A) $11,250
B) $14,400
C) $15,000
D) $16,000
A gain on the sale of a fixed asset is reported on the statement of cash flows ________.
A) as a deduction to net income under operating activities for the indirect method
B) as a deduction to the cash proceeds received from the sale of fixed assets under
investing activities
C) as a noncash transaction
D) as a cash inflow under financing activities
Train Company has two service departments, Maintenance and Human Resources.
Train Company also has two production departments, Mixing and Finishing.
Maintenance costs are allocated based on square footage while Human Resources costs
are allocated based on number of employees. The following information has been
gathered for the current year:
Human
Maintenance Resources Mixing Finishing
Direct costs $50,400 $33,600 $42,000 $70,000
Square footage 1,600 800 3,200 2,400
Number of employees 16 24 48 64
If the direct method is used to allocate service department costs, then the total cost of
the Human Resources Department after the Maintenance Department cost allocation
would be ________.
A) $33,600
B) $38,640
C) $39,900
D) $50,400
Jackson Company collected $1,200 on account. Jackson will ________.
A) Debit Cash $1,200 and Credit Accounts Payable $1,200
B) Debit Accounts Receivable $1,200 and Credit Cash $1,200
C) Debit Accounts Payable $1,200 and Credit Cash $1,200
D) Debit Cash $1,200 and Credit Accounts Receivable $1,200
Inverness Company is considering the replacement of a machine that is presently used
in production. The following data are available:
Old Machine New Machine
Original cost $57,000 $35,000
Useful life in years 17 5
Current age in years 12 0
Book value $39,000 –
Disposal value now $8,000 –
Disposal value in 5 years 0 0
Annual cash operating costs $7,000 $4,000
Adding all five years together, what is the difference in total relevant costs between the
old machine and the new machine?
A) $12,000
B) $15,000
C) $22,000
D) $37,000
If the direct labor price variance is $800 Favorable and the direct labor usage variance
is $700 Unfavorable, then ________.
A) the flexible budget variance for direct labor is $100 Favorable
B) actual total wages paid were $800 more than expected
C) actual labor hours were less than expected
D) actual material prices were less than expected
An investor holds 5% of the outstanding stock of an investee. Securities that the
investor company does not intend to sell in the near future are called ________.
A) trading securities
B) options
C) available-for-sale securities
D) equity method securities