1) Crown Industries has the following information about its standards and production
activity for December:
Actual manufacturing overhead cost incurred, $92,500
Variable manufacturing overhead cost @ $3.25 per unit produced
Fixed manufacturing overhead cost @ $1.50 per unit produced
($22,500/15,000 budgeted units)
Actual units produced, 5,400
Assume the allocation base for fixed overhead costs is the number of units to be
produced.
How much are the standard overhead costs allocated to actual production?
A) $48,750
B) $92,500
C) $71,250
D) $25,650
2) BusyBody Company expects its November sales to be 20% higher than its October
sales of $180,000. Purchases were $110,000 in October and are expected to be
$160,000 in November. All sales are on credit and are collected as follows: 35% in the
month of the sale and 60% in the following month. Purchases are paid 40% in the
month of purchase and 60% in the following month. The cash balance on November 1
is $13,500. The cash balance on November 30 will be
A) $4,100
B) $53,600
C) $67,100
D) $40,100
3) A company is deciding whether to purchase production equipment which can
produce units more quickly than the current equipment. Which of the following costs
would be relevant to its decision?
A) The cost of the new equipment
B) The salary of the factory manager
C) The cost of raw materials
D) The original purchase price of the current machinery
4) In a traditional accounting system, many indirect costs are assigned to overhead
because they are difficult to trace to a product or process. Consequently, many
environmental costs may be concealed in the overhead account. This is an example of
which type of EMA implementation challenge?
A) Historical orientation of accounting
B) Communication issue
C) Newness of EMA
D) Hidden Cost
5) The Akron Slugger Company produces various types of wooden baseball bats. It has
calculated the average cost per unit of a production level of 7,500 bats to be $10.00. If
$22,500 of the costs are fixed, and the plant manager uses the cost equation to predict
total costs, her forecast for 8,500 bats will be
A) $10,000
B) $75,000
C) $85,000
D) $82,000
6) Issuing preferred stock to stockholders would be a
A) cash inflow from investing
B) cash inflow from operations
C) cash inflow from depreciation
D) cash inflow from financing
7) Fun Stuff Manufacturing produces frisbees using a three-step process that includes
molding, coloring and finishing. Requisition of materials to molding includes a
A) debit to raw materials inventory
B) debit to manufacturing overhead
C) credit to raw materials inventory
D) credit to finished goods inventory
8) Sustainability is concerned not only with the impact on the environment, but also
with the impact on people and profit. The “triple bottom line” measures an entity’s
impact on profit, people, and planet. A manufacturing firm that realized a 10% increase
in total shareholder return is impacting which element of the triple bottom line?
A) Profit
B) People
C) Planet
D) None of the above
9) DOT Safety Systems manufactures motorcycle helmets. What is the standard
quantity of material used to manufacture each helmet if the material required is 1.2
pounds, and DOT allows for .25 pounds of waste and .35 pounds of rejected material?
A) 1.80 pounds
B) 1.45 pounds
C) 1.55 pounds
D) 1.20 pounds
10) Which of the following is used as the equation’s numerator when computing the
payback period for a capital asset with equal annual net cash inflows?
A) Expected annual cash inflow
B) Total cash inflows
C) Amount invested
D) Net cash outflow
11) The “decision model that computes the difference between the present value of the
investment’s net cash inflows, using a desired rate of return, and the cost of the initial
investment” is best described by which of the following terms?
A) Accounting rate of return
B) Discount rate
C) Net present value
D) Internal rate of return
12) (Present value tables are required.) Vino Winery is considering the purchase of a
state-of-the-art bottling machine. The new machine will cost $28,250 and will have a
useful life of 10 years. The new machine will provide net cash savings of $5,000 per
year. What is the internal rate of return (IRR) for the new bottling machine?
A) 8%
B) 10%
C) 12%
D) 14%
13) Westfall Watches has two product lines: Luxury watches and Sporty watches.
Income statement data for the most recent year follow:
Assuming the Sporty line is discontinued, total fixed costs remain unchanged, and the
space formerly used to produce the line is rented for $32,000 per year, how will
operating income be affected?
A) Increase $22,000
B) Increase $174,000
C) Decrease $22,000
D) Increase $81,000
14) Assume that 8,200 units were in beginning WIP inventory, 34,500 were started,
30,000 were completed, and 12,700 were in ending WIP inventory. Direct materials are
added at the beginning of the process. What are the total equivalent units for direct
materials?
A) 42,700
B) 47,200
C) 38,200
D) 34,500
15) The number of employee suggestions implemented and percentage of the sales
force with access to real-time inventory levels would be examples of the
A) financial perspective
B) learning and growth perspective
C) internal business perspective
D) customer perspective
16) 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 completed and transferred out?
A) $612,675
B) $632,625
C) $563,317
D) $615,381
17) Shiloh Company uses a job costing system. The company’s schedule of cost of
goods manufactured showed the following amounts for September.
Actual manufacturing overhead costs for September amount to $24,000.
What is the amount of work in process inventory on September 30?
A) $13,500
B) $66,000
C) $73,500
D) $21,000
18) “A measure of profitability computed by dividing the average annual operating
income by the amount of the investment” is best described by which of the following
terms?
A) Net present value
B) Discount rate
C) Internal rate of return
D) Accounting rate of return
19) Which of the following parties would have an interest in the cash a company has?
A) Creditors expecting loans and interest to be repaid
B) Employees expecting to be reimbursed for their work
C) Investors expecting a dividend
D) All of the above are parties interested in the cash of a company
20) A statement of cash flows is generated to show
A) the revenues the company has earned
B) the expenses the company incurred during the time period
C) how profits were generated
D) the inflow and outflow of cash during the time period
21) A company uses the indirect method to prepare the statement of cash flows. It
presents the following amounts on its financial statements.
*Relates solely to the acquisition of inventory
What will appear in the operating activities section related to salary payable?
A) The decrease of $3,000 will be added to net income
B) The decrease of $3,000 will be added to cost of goods sold
C) The decrease of $3,000 will be subtracted from cost of goods sold
D) The decrease of $3,000 will be subtracted from net income
22) The Maple Company has total fixed costs of $400,000. It also has $200,000 in total
variable costs. These costs exist at a production level of 100,000 units. The variable
cost per unit is
A) $2.00
B) $6.00
C) $4.00
D) $1.50
23) The cost of maintaining quality control testing equipment would be classified as
a(n) ________ cost.
A) appraisal
B) prevention
C) internal failure
D) external failure
24) Camden Corporation has operating income of $87,000, a sales margin of 15%, and
capital turnover of 2.5 . The return on investment (ROI) for Camden Corporation would
be closest to
A) 6%
B) 38%
C) 107%
D) 2%
25) Sea Side Enterprises is trying to predict the cost associated with producing its
anchors. At a production level of 5,000 anchors, Sea Side Enterprises average cost per
anchor is $52.00. If $15,000 of the costs are fixed, and the plant manager uses the cost
equation to predict total costs, her forecast for 6,000 anchors will be
A) $52,000
B) $260,000
C) $312,000
D) $309,000
26) Cooper’s Bags Company manufactures cloth grocery bags to be sold to grocery
stores and other retailers. Cooper’s Bags Company sells the bags in cases of 1,000 bags.
The bags come in three sizes: Large, Medium, and Small. Currently, Cooper’s Bags
Company uses a single plantwide overhead rate to allocate its $8,088,000 of annual
manufacturing overhead. Of this amount, $2,210,000 is associated with the Large Bag
line, $3,418,800 is associated with the Medium Bag line, and $2,459,000 is associated
with the Small Bag line. Cooper’s Bags Company is currently running a total of 40,000
machine hours: 13,000 in the Large Bag line, 15,400 in the Medium Bag line, and
11,600 in the Small Bag line. Cooper’s Bags Company uses machine hours as the cost
driver for manufacturing overhead costs.
The departmental manufacturing overhead rate for the Small Bag line would be closest
to
A) $202.20 per machine hour
B) $212.00 per machine hour
C) $170.00 per machine hour
D) $222.00 per machine hour
27) Wallace Incorporated wanted to determine the relationship between its monthly
operating costs and a potential cost driver, machine hours. The output of a regression
analysis showed the following information (note: only a portion of the regression
analysis results is presented here):
What is the fixed cost (round to nearest cent)?
A) $67.59
B) $0.99
C) $2,945.95
D) $0.72
28) Tom’s Taxidermy has a monthly target operating income of $25,000. Variable
expenses are 75% of sales and monthly fixed expenses are $15,000. What is the
monthly margin of safety in dollars if the business achieves its operating income goal?
A) $220,000
B) $160,000
C) $40,000
D) $100,000
29) Brambles Corporation has two sequential processing departments: Assembly then
Shaping. The Shaping Department reports the following information. Conversion costs
are applied evenly throughout the process.
What is the total number of equivalent units for conversion costs?
A) 54,400
B) 65,000
C) 60,900
D) 55,900
30) In vertical analysis, the base used for comparison on the balance sheet is
A) total stockholders equity
B) total liabilities
C) total liabilities plus total stockholders equity or total assets
D) none of the above
31) Payroll costs for factory employees who do not work directly on the product are
considered
A) direct labor
B) selling expenses
C) manufacturing overhead
D) administrative costs
32) Note the following data:
The cost of ending WIP is closest to
A) $133,950
B) $593,750
C) $311,900
D) $414,200