1) The Future Value of $1 table is used to calculate how much $100 in hand today
would be worth in 5 years.
2) Investors and management use the statement of cash flows to evaluate a firm’s
profitability.
3) In job costing, when indirect materials are requisitioned for a job, the raw materials
inventory account is credited.
4) A plantwide overhead rate is calculated by multiplying the estimated total
manufacturing overhead costs for the year by estimated total amount of the allocation
base for the year.
5) A constraint is a factor that restricts production or sale of a product.
6) The master budget of a service company has fewer individual budget components
than does the master budget of a manufacturing company.
7) Process costing is typically used for businesses that make unique goods in relatively
small amounts.
8) An example of a prevention cost is the cost of redesigning the product to reduce its
complexity.
9) Total mixed cost graphs intersect the y-axis at the level of fixed costs.
10) For an EMA system to be effective, accounting information will need to be tagged
with multiple identifiers to serve various information needs.
11) Which type of company makes up the largest sector of the United States economy?
A) Manufacturers
B) Merchandising
C) Wholesalers
D) Service companies
12) The correct order of the sections on a statement of cash flows is
A) operating, investing, financing
B) financing, investing, operating
C) investing, operating, financing
D) operating, financing, investing
13) Feeney Furniture prepared the following sales budget:
Credit collections are 15% two months following the sale, 50% in the month following
the sale, and 30% in the month of sale. The remaining 5% is expected to be
uncollectible.
What is the total cash received in April from April sales?
A) $4,800
B) $39,000
C) $3,000
D) $40,800
14) London Plastics sells a product for $15.00 per unit. The product requires $4.00 per
unit in variable costs to produce it. The company plans on selling 12,000 units of this
product. If the monthly fixed costs are $84,000, the total sales revenue will be
A) $70,000
B) $84,000
C) $154,000
D) $180,000
15) Which of the following is an advantage of zero-based budgeting?
A) It is time consuming
B) It forces managers to justify every dollar put in the budget, so some expenses may be
lower than they were in previous years
C) It is labor intensive
D) All of the above are advantages
16) Goliath Company prepared the following purchases budget:
All purchases are paid for as follows: 30% in the month of purchase, 45% in the
following month, and 25% two months after purchase.
What are the cash disbursements in August for June purchases?
A) $10,680
B) $20,610
C) $16,020
D) $8,900
17) Tommy’s Toys produces two types of toys: trains and dolls. Tommy’s uses stainless
steel to manufacture the trains and plastic to manufacture the dolls. Information
regarding the usage of steel and plastic for the past year follows:
What is the direct material quantity variance for plastic in the dolls?
A) $378 favorable
B) $1,422 favorable
C) $378 unfavorable
D) $1,422 unfavorable
18) The human resources department for Kohl’s Department Stores would most likely
be classified as a(n)
A) cost center
B) investment center
C) profit center
D) revenue center
19) Which would be a consideration for making special orders?
A) Available capacity to fill the order
B) If price will cover incremental costs of filling the order
C) If the order will affect regular sales in the long run
D) All of the above
20) When using the high-low method, what is the correct order of the following three
steps?
i.write the cost equation
ii.find the vertical intercept
iii.find the slope
A) i, ii, iii
B) ii, iii, i
C) iii, ii, i
D) iii, i, ii
21) Yummy Tummy Desserts has 3,200 quarts of ice cream in WIP inventory, with all
materials already added. What are equivalent units in ending WIP inventory for
materials if the ice cream is 75% through the process?
A) 3,200
B) 2,400
C) 800
D) 0
22) Frost Company has a contribution margin per unit of $49. If 7,000 more items are
sold, and fixed expenses remain the same, the net change in operating income will be
A) $343,000
B) $(343,000)
C) $143
D) $7,000
23) Schrute Farm Sales buys portable generators for $450 and sells them for $720. He
pays a sales commission of 5% of sales revenue to his sales staff. Mr. Schrute pays
$2,000 a month rent for his store, and also pays $1,700 a month to his staff in addition
to the commissions. Mr. Schrute sold 200 generators in June. If Mr. Schrute prepares a
contribution margin income statement for the month of June, what would be his
operating income?
A) $ 97,200
B) $ 50,,500
C) $144,000
D) $ 43,100
24) Which of the following statements is TRUE?
A) Managerial accounting reports aid potential investors
B) Managerial accounting reports must follow GAAP
C) Managerial accounting reports are audited by CPAs
D) Managerial accounting reports provide detailed internal information
25) All of the following are advantages of using standard costs except
A) managers can evaluate the efficiency of production workers
B) differences between the static budget and the flexible budget can be broken down
into price and quantity components
C) consumer motivation for purchases can be analyzed
D) standard costing allows companies to create flexible budgets
26) Claudia Enterprises has budgeted the following amounts for its next fiscal year:
If Claudia Enterprises can reduce fixed expenses by $12,000, how will breakeven sales
in units be affected?
A) Decrease by 400 units
B) Increase by 133 units
C) Increase by 400 units
D) Decrease by 133 units
27) A company sells goods and offers credit terms of “net 30 days.” What does this
mean for the company that sold the goods?
A) It does not have to ship the goods for 30 days
B) It cannot recognize the sales credit for 30 days
C) It offers a 30% discount for customers that use credit cards
D) The customer has up to 30 days to pay back the seller for the goods purchased
without penalty
28) At Sunrise Corporation, direct materials are added at the beginning of the process
and conversions costs are uniformly applied. Other details include:
What is the total cost of units remaining in ending WIP?
A) $69,000
B) $100,050
C) $91,908
D) $120,750
29) Anderson Enterprises uses a job costing system. Record the following transactions
in Anderson Enterprises’ general journal for the current month:
a)Purchased raw materials on account, $82,000.
b)Requisitioned $41,300 of direct materials and $9,000 of indirect materials for use in
production.
c)Factory payroll incurred, $110,000; 75% direct labor, 25% indirect labor.
d)Recorded depreciation expense factory equipment $15,000, and other manufacturing
overhead of $56,200 (credit accounts payable).
e)Allocated manufacturing overhead costs based on 125% of direct labor cost.
f)Cost of completed production for the current month, $133,000.
g)Cost of finished goods sold, $112,000; selling price, $162,000 (all sales on account).
30) A shampoo manufacturer offers the following information:
The units in ending WIP inventory were 60% complete for materials and 40% complete
for conversion costs.
What is the total cost of units in ending WIP?
A) $345,600
B) $107,520
C) $153,600
D) $207,360
31) (Present value tables are needed.) O’Mally Department Stores is considering two
possible expansion plans. One proposal involves opening 5 stores in Indiana at the cost
of $1,920,000. Under the other proposal, the company would focus on Kentucky and
open 6 stores at a cost of $2,500,000. The following information is available:
The net present value of the Indiana proposal is closest to
A) $538,000
B) $557,300
C) $461,650
D) $1,171,800
32) The mixing department has 44,000 equivalent units of direct materials and 25,000
equivalent units of conversion costs. The direct materials cost $33,000, and the
conversion costs are $10,000. Assuming no beginning inventory, the total cost per
equivalent unit is
A) $0.98
B) $0.40
C) $1.15
D) $0.75
33) Johnson Trucking Company wants to determine a fuel surcharge to add to its
customers’ bills based on the number of miles driven to each area. It wants to separate
the fixed and variable portion of the truck’s operating costs so it has a better idea of how
distance affects these costs. Johnson Trucking Company has the following data
available.
The variable cost per mile using the high-low method is
A) $1.33
B) $0.75
C) $1.43
D) $1.00
34) Which of the following statements is TRUE concerning income if production
exceeds units sold?
A) A higher operating income will result under a variable costing income statement
B) A lower operating income will result under an absorption costing income statement
C) A higher operating income will result under an absorption costing income statement
D) The same operating income will result under both a variable costing and absorption
costing income statement
35) If the accounting rate of return exceeds the required accounting rate of return,
A) invest in the capital asset
B) do not invest in the capital asset
C) only invest if the payback period is also greater than the required rate of return
D) only invest if the payback period is also less than the required rate of return
36) The Muffin House produces and sells a variety of muffins. The selling price per
dozen is $15, variable costs are $9 per dozen, and total fixed costs are $4,200. What are
breakeven sales in dollars?
A) $10,500
B) $2,625
C) $700
D) $6,300
37) If all direct materials are added at the beginning of the production process, and the
units have made it 50% of the way through the production process, then the percentage
completion for direct materials is
A) 100%
B) 0%
C) 50%
D) none of the above
38) Selected financial information for Greek Food Producers is presented in the
following table (000s omitted).
What was cost of goods sold?
A) $1,030
B) $1,160
C) $ 790
D) $1,320
39) Which of the following is an example of a financial budget?
A) Budgeted balance sheet
B) Sales budget
C) Budgeted income statement
D) Operating expenses budget
40) When a job is completed, the journal entry involves a:
A) debit to work in process inventory and a credit to finished goods inventory
B) debit to cost of goods sold and a credit to finished goods inventory
C) debit to finished goods inventory and a credit to work in process inventory
D) debit to finished goods and a credit to cost of goods sold
41) Kramer Company manufactures coffee tables and uses an activity-based costing
system to allocate all manufacturing conversion costs. Each coffee tables consists of 20
separate parts totaling $240 in direct materials, and requires 5.0 hours of machine time
to produce. Additional information follows:
What is the cost of assembling per coffee table?
A) $40.00
B) $15.00
C) $7.75
D) $20.00
42) Porches, Inc., sells lawn furniture. Selected financial information for the most
recent year follows.
Beginning merchandise inventory on January 1 was $33,000.
Ending merchandise inventory on December 31 was $35,000.
Purchases during the year were $92,000.
Selling and administrative expenses were $75,000.
Sales for year were $262,000.
What was cost of goods sold?
A) $160,000
B) $ 94,000
C) $ 90,000
D) $ 95,000
43) Here are selected data for Wilson Company:
If the company allocates overhead based on direct labor cost, what is the predetermined
manufacturing overhead rate?
A) 76% of direct labor cost
B) 133% of direct labor cost
C) 75% of direct labor cost
D) 102% of direct labor cost
44) A company has overallocated manufacturing overhead by $1,500. The entry to close
manufacturing overhead account would be to
A) debit manufacturing overhead and credit cost of goods sold for $1,500
B) debit manufacturing overhead and credit work in process for $1,500
C) debit cost of goods sold and credit manufacturing overhead for $1,500
D) debit cost of goods sold and credit finished goods inventory for $15,000
45) Sherwin Chemicals produces commercial strength cleansing supplies. Two of its
main products are window cleanser that uses ammonia, and floor cleanser that uses
bleach. Information for the most recent period follows:
What is the direct materials price variance for ammonia?
A) $2,500 favorable
B) $2,500 unfavorable
C) $375 favorable
D) $375 unfavorable
46) Goliath Company prepared the following purchases budget:
All purchases are paid for as follows: 30% in the month of purchase, 45% in the
following month, and 25% two months after purchase.
What are the cash disbursements in October for September purchases?
A) $20,610
B) $11,450
C) $8,900
D) $152,667
47) To ensure a profit in the current year a company ships out pre-ordered merchandise
the last week of December, instead of in mid-January as the customer instructed. This
early shipment could be a violation of which ethical standard?
A) Confidentiality
B) Integrity
C) Competence
D) All of the above