1) At Plastastic, Inc., the beginning balance of the work in process inventory account in
April of the most recent year was $19,000. Direct materials used during April totaled
$130,000. Total manufacturing labor incurred in April was $180,000, 75% of this
amount represented direct labor. The predetermined manufacturing overhead rate is
130% of direct labor cost. Actual manufacturing overhead costs for April amounted to
$160,000.
In April, two jobs were completed with total costs of $110,000 and $95,000,
respectively. In April, the two jobs were sold on account for $187,000 and $124,000,
respectively.
a) Compute the balance in work in process inventory on April 30 .
b) Record the journal entry for direct materials used in April.
c) Record the journal entry to record labor costs for April.
d) Record the journal entry for allocated manufacturing overhead for April.
e) Record the entry to move the completed jobs into finished goods inventory in April.
f) Record the entry to sell the two completed jobs on account in April.
2) A company uses the indirect method to prepare the statement of cash flows. How will
a gain from the sale of equipment be presented on the statement?
A) A gain from the sale of equipment will be an addition in the investing activities
section
B) A gain from the sale of equipment will be added to net income in the operating
activities section
C) A gain from the sale of equipment will be a deduction in the financing activities
section
D) A gain from the sale of equipment will be deducted from net income in the operating
activities section
3) Joe’s Bottling Company provided the following expense information for July:
What is the total cost for the distribution category of the value chain?
A) $40,000
B) $43,000
C) $219,000
D) $171,000
4) The ________ section from the statement of cash flows includes activities that create
revenue, expenses, gains and losses.
A) investing
B) operating
C) financing
D) None of the above
5) What are scatter plots useful for?
A) Determining the overall strength of the relationship between historical cost and
volume
B) Identifying potential outliers
C) Both of the above
D) Neither of the above
6) 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 as a percentage of target sales in dollars?
A) 62.50%
B) 137.50%
C) 25.00%
D) 167.67%
7) Which of the following is an example of the IMA’s integrity standard?
A) Provide decision support that is accurate, clear, concise and timely
B) Keep information confidential, except when disclosure is legally required
C) Communicate information fairly and objectively
D) Abstain from engaging in or supporting any activity that might discredit the
profession
8) Fixed costs that do not differ between two alternatives are
A) irrelevant to the decision
B) considered opportunity costs
C) relevant to the decision
D) important only if they represent a material dollar amount
9) To follow is selected financial data from Turtle Bay Manufacturing for the most
recent year.
What is the actual manufacturing overhead?
A) $65,100
B) $54,900
C) $ 5,100
D) $60,000
10) The Crest division of Procter & Gamble is most likely treated as a(n)
A) investment center
B) cost center
C) profit center
D) revenue center
11) To resolve ethical dilemmas, the IMA suggests that management accountants should
first
A) consult an attorney
B) call the IMA “Ethics Hotline”
C) follow their company’s established policies for reporting unethical behavior
D) discuss the unethical situation with their immediate supervisor
12) For external reporting purposes, U.S. GAAP allows companies to use ________.
A) either the traditional format or the contribution margin format
B) only the contribution margin format of the income statement
C) only the traditional format of the income statement
D) the variable costing format
13) Collectively, all costs such as distribution, marketing, and design are part of
A) downstream activities
B) fixed costs
C) the value chain
D) manufacturing costs
14) Joe’s Bottling Company provided the following expense information for July:
What is the total cost for the production category of the value chain?
A) $457,000
B) $307,000
C) $148,000
D) $146,000
15) Sole Purpose manufactures beach shoes that use a canvas as the main raw material.
Data related to the shoes for June follows:
What is the materials quantity variance for canvas for June?
A) $1,645 favorable
B) $2,100 favorable
C) $1,645 unfavorable
D) $2,100 unfavorable
16) The sales price of a particular unit is $19.00. The company plans to sell 7,500 units.
The variable costs are $6.00 per unit and monthly fixed costs are $112,500. Given this
information what is the average fixed cost per unit?
A) $6.00 per unit
B) $21.00 per unit
C) $13.00 per unit
D) $15.00 per unit
17) The three major categories included on the statement of cash flows are
A) investing, capital and financing activities
B) investing, operating and financing activities
C) investing, operating and capital activities
D) financial, operating and capital activities
18) Longview Baskets has in its inventory 2,000 damaged baskets that cost $20,000.
The baskets can be sold in their present condition for $12,000, or repaired at a cost of
$13,000 and sold for $35,000. What is the opportunity cost of selling the baskets in
their present condition?
A) $32,000
B) $25,000
C) $48,000
D) $22,000
19) At Dwight Incorporated, total fixed and variable costs are $400,000 at a production
level of 100,000 units. The company has total fixed costs of $225,000. The fixed cost
per unit at a production level of 150,000 units is
A) $4.00
B) $2.25
C) $2.67
D) $1.50
20) Paper Clip Company sells office supplies. The following information summarizes
the company’s operating activities for the year:
What is cost of goods sold?
A) $85,000
B) $89,000
C) $108,000
D) $112,000
21) Daisy Company manufactures dog collars. The following selected data relates to
Daisy Company’s budgeted sales and inventory levels of the dog collars for the
upcoming quarter:
How many dog collars should Daisy Company produce in November?
A) 2,870
B) 3,320
C) 4,170
D) 2,470
22) Black Productions has three models: D, E, and F. The following information is
available:
Black Productions is thinking of discontinuing model F because it is reporting an
operating loss. All fixed costs are unavoidable. Assume Black Productions is able to
increase the sale price of product F to $35,000 with no change in volume of units sold
and no change in variable costs or fixed costs. What effect will this have on operating
income?
A) Increase $11,000
B) Increase $24,000
C) Decrease $11,000
D) Decrease $24,000
23) Suppose Whole Foods is considering investing in warehouse-management software
that costs $600,000, has $60,000 residual value and should lead to cash cost savings of
$130,000 per year for its five-year life. In calculating the ARR, which of the following
figures should be used as the equation’s denominator?
A) $60,000
B) $600,000
C) $130,000
D) $275,000
24) A manufacturer of plywood would use what type of product costing system?
A) Process costing
B) Job costing
C) Either job or process
D) Both job and process
25) Which of the following items does not represent physical information in
environmental management accounting system?
A) Tons of scrap metal recycled
B) Kilowatt hours of electricity used
C) Gallons of toxic waste generated
D) Cost of sulfur used in erasers
26) All of the following are period costs except
A) distribution expenses
B) direct labor expenses
C) marketing expenses
D) research and development expenses
27) How is the cost of indirect labor used in the factory recorded?
A) Credit to manufacturing overhead
B) Credit to wages payable
C) Credit to work in process inventory
D) Credit to wages expense
28) Molly has the following information to evaluateher current salary of $57,000 versus
total revenues of $62,000 and expenses of $47,000 from starting a new business. How
much is the opportunity cost associated with starting the new business?
A) $62,000
B) $15,000
C) $57,000
D) $47,000
29) Eastern Corporation collects 10% in the second month following sale, 55% in the
month following sale and 35% of a month’s sales in the month of sale. Budgeted sales
for the upcoming four months are:
The amount of cash that will be collected in July is budgeted to be
A) $63,000
B) $204,500
C) $173,000
D) $197,000
30) A company uses the indirect method to prepare the statement of cash flows. How
will amortization be presented on the statement?
A) Amortization expense will be added to net income in the financing activities section
B) Amortization expense will be subtracted from net income in the operating section
C) Amortization expense will be added to net income in the operating activities section
D) Amortization expense will be added to net income in the investing activities section
31) Missy & Daughters allocates manufacturing overhead to jobs based on direct labor
hours. The company has the following estimated costs for the upcoming year:
The company estimates that 1,360 direct labor hours will be worked in the upcoming
year, while 1,000 machine hours will be used during the year. The predetermined
manufacturing overhead rate per direct labor hour will be
A) $50
B) $91
C) $179
D) $59
32) The journal entry needed to record the completion of a job includes a
A) credit to work in process inventory
B) credit to finished goods inventory
C) debit to work in process inventory
D) debit to cost of goods sold
33) Warshaw Company budgets payroll at $3,600 per month plus a percentage of
monthly sales. The June operating expense budget includes total payroll of $13,200
with budgeted sales of $160,000. Sales for July are budgeted at $180,000 while
purchases of inventory for July are budgeted at $95,000. Depreciation and insurance for
July are estimated at $1,000 and $600, respectively. Office and administrative expenses
related to purchasing inventory are budgeted at 10% of purchases for the month. The
purchase of $2,500 in equipment and $1,500 in furniture is expected in July.
If the percentage of monthly sales used in budgeting payroll increases 25%, what would
the total payroll budgeted for July be?
A) $20,025
B) $17,100
C) $13,500
D) $14,400
34) Your wealthy neighbor has promised to give you $2,000 a year at the end of each of
the next four years to help with college. Using a discount rate of 8%, the present value
of the gift can be stated as
A) PV = $2,000 (PV factor, i = 4%, n = 4)
B) PV = $2,000 8% 5
C) PV = $2,000 (Annuity FV factor, i = 8%, n = 4)
D) PV = $2,000 (Annuity PV factor, i = 8%, n = 4)
35) Which step is performed first when using the high-low method?
A) Find the vertical intercept
B) Write the cost equation
C) Predict total cost
D) Find the slope
36) On the line in front of each variance, enter the letters of the items needed to
compute that variance. You will enter more than one item on each line.
A.Standard overhead allocated to production
B.Flexible budget overhead for actual number of outputs
C.Actual variable overhead cost
D.Fixed overhead costs
______Overhead flexible budget variance
______Production volume variance
37) Preparing budgets is an example of which of the following management functions?
A) Planning
B) Directing
C) Analyzing
D) Controlling
38) A company’s total costs are calculated by
A) subtracting total fixed costs from total variable costs
B) subtracting total variable costs from total fixed costs
C) subtracting total fixed costs and total variable costs from sales
D) adding total fixed costs to total variable costs
39) Hardrock Company uses job costing. Hardrock Company has two departments,
Sanding and Finishing. Manufacturing overhead is allocated based on direct labor cost
in the Sanding Department and direct labor hours in the Finishing Department. The
following additional information is available:
Actual data for completed Job No. 140 is as follows:
a) Compute the predetermined manufacturing overhead rate for the Sanding
Department.
b) Compute the predetermined manufacturing overhead rate for the Finishing
Department.
c) What is the total manufacturing overhead cost for Job. No. 140?
d) If Job No. 140 consists of 500 units of product, what is the average unit cost of this
job?
