1) KPI in the Balanced Scorecard stands for Knowledge Profitability Index.
2) The statement of cash flows shows not only the amount of cash used during a
particular time, but also how the cash was used.
3) The breakeven point represents the minimum number of units a company must sell
before it earns a profit.
4) The FIFO method requires that any units in beginning inventory be costed separately
from any units started in the current period.
5) A departmental overhead rate is calculated by dividing the total estimated
departmental overhead cost pool by the estimated total amount of the department’s cost
allocation base.
6) When calculating the breakeven point in terms of sales revenue, variable costs should
be divided by the contribution margin ratio.
7) Companies that use departmental overhead rates trace direct materials and direct
labor to cost objects just as they would in a traditional costing system.
8) When a company uses direct materials, the amount of the debit to Work in Process
Inventory is based on the standard quantity of the materials that should have been used
times the standard price per unit of the materials.
9) Planning, directing, and controlling are a manager’s three primary responsibilities.
10) The “total costs to account for” is the sum of the costs in beginning WIP inventory
plus the manufacturing costs added during the period.
11) Distribution Corporation collects 40% of a month’s sales in the month of sale, 55%
in the month following sale, and 5% in the second month following sale. Budgeted
sales for the upcoming four months are:
The amount of cash that will be collected in July is budgeted to be
A) $72,000
B) $179,500
C) $206,000
D) $195,500
12) The cost of product liability claims is an example of a(n) ________ cost.
A) appraisal
B) internal failure
C) external failure
D) prevention
13) Federer Company is debating the use of direct labor cost or direct labor hours as the
cost allocation base for allocating manufacturing overhead. The following information
is available for the most recent year:
If Federer Company uses direct labor hours as the allocation base, what would the
predetermined manufacturing overhead rate be?
A) $1.51 per direct labor hour
B) $1.70 per direct labor hour
C) $1.40 per direct labor hour
D) $1.83 per direct labor hour
14) Tuity Fruity Beverage Company’s operating activities for the year are listed below.
What is the gross profit for the year?
A) $160,000
B) $300,000
C) $80,000
D) $166,000
15) Paper Clip Company sells office supplies. The following information summarizes
the company’s operating activities for the year:
What is gross profit?
A) $75,000
B) $42,000
C) $83,000
D) $56,000
16) You won the lottery and have a number of choices as to how to take the money.
Which choice yields a greater present value?
A) $12,000 a year at the end of each of the next 6 years using a 6% discount rate
B) $53,500 (lump sum) now using a 6% discount rate
C) $90,000 (lump sum) 7 years from now using a 6% discount rate
D) $92,000 (lump sum) 7 years from now using an 8% discount rate
17) To record direct labor costs incurred, which of the following would be debited?
A) Finished goods inventory
B) Manufacturing overhead
C) Work in process inventory
D) Wages payable
18) Allocating manufacturing overhead costs is done
A) during the period
B) before the period starts
C) at the end of the period
D) never
19) A salesperson’s salary would be classified as ________ when determining the cost
of a manufactured product.
A) a direct cost
B) a period cost
C) an indirect cost
D) none of the above
20) Here are selected data for Stehli Company:
If the company allocates overhead based on direct labor cost, what is the predetermined
manufacturing overhead rate?
A) 78% of direct labor cost
B) 128% of direct labor cost
C) 79% of direct labor cost
D) 102% of direct labor cost
21) If manufacturing overhead has been underallocated during the period, and most of
the jobs produced have been sold, then
A) cost of goods sold should be increased
B) cost of goods sold should be decreased
C) finished goods inventory should be increased
D) work in process inventory should be decreased
22) Which of the following would not be considered a direct material for a mattress?
A) Fabric
B) Lumber
C) Glue
D) Steel
23) Answer the following questions:
a.What is a cost equation?
b.If a company has fixed costs of $1,000 and variable costs of $4 per unit, what is their
cost equation?
c.What would a company use a cost equation for?
24) 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 average cost per unit to
predict total costs, her forecast for 8,500 bats will be
A) $10,000
B) $85,000
C) $82,000
D) $75,000
25) The ________ is the difference between total actual overhead costs and the flexible
budget amount for overhead costs for actual production.
A) production volume variance
B) overhead flexible budget variance
C) overhead efficiency variance
D) both A and C
26) How is the cost-plus price determined?
A) Cost – markup on cost
B) Cost + markup on cost
C) Cost markup on cost
D) Cost markup on cost
27) The ________ section from the statement of cash flows includes loans to others and
collections on loans.
A) investing
B) financing
C) operating
D) None of the above
28) The quantity and cost of purchasing hazardous materials is included in the
Purchases account for all materials. This scenario is an example of which type of EMA
implementation challenge?
A) Historical orientation of accounting
B) Communication issue
C) Newness of EMA
D) Aggregated accounting information
29) Rustic Living Furniture Company manufactures furniture at its central Kentucky
factory. Some of its costs from the past year include:
Prime costs for Rustic Living Furniture Company totaled
A) $126,000
B) $23,000
C) $123,000
D) $168,500
30) Jim Bean Company has three product lines: D, E, and F. The following information
is available:
DEF
Sales revenue$80,000$42,000$20,000
Variable expenses$40,000$21,000$12,000
Contribution margin$40,000$21,000$8,000
Fixed expenses$12,000$15,000$17,000
Operating income (loss)$28,000$46,000$(9,000)
Jim Bean Company is thinking of discontinuing product line F because it is reporting an
operating loss. All fixed expenses are unavoidable. Assuming Jim Bean Company
discontinues product line F and does not replace it, what affect will this have on
operating income?
A) Increase $9,000
B) Increase $17,000
C) Increase $8,000
D) Decrease $8,000
31) The SEC is considering the move to adopt IFRS for which types of companies?
A) All U.S. companies
B) All U.S. publicly traded companies
C) All U.S. private companies
D) Only foreign companies operating in the U.S
32) Here is some basic data for Delta Manufacturing:
The journal entry to record actual manufacturing overhead costs includes a
A) debit to manufacturing overhead for $98,000
B) debit to work in process inventory for $96,000
C) credit to work in process inventory for $98,000
D) credit to manufacturing overhead for $96,000
33) There are a total of 14,000 students at a school. Eighty percent of them go full time
at 16 hours per term. Ten percent take a half-load of 8 hours per term, and ten percent
take a three-quarter load of 12 hours per term. What is the equivalent number of
full-time students?
A) 11,200
B) 14,000
C) 12,950
D) 1,750
34) The contribution margin per unit of constraint is calculated as
A) contribution margin per unit constraint per unit
B) contribution margin per unit units per constraint
C) contribution margin per unit units per constraint
D) contribution margin per unit + constraint per unit
35) The following account balances at the beginning of January were selected from the
general ledger of Ocean City Manufacturing Company:
Additional data:
1> Actual manufacturing overhead for January amounted to $62,000.
2> Total direct labor cost for January was $63,000.
3> The predetermined manufacturing overhead rate is based on direct labor cost. The
budget for the year called for $250,000 of direct labor cost and $350,000 of
manufacturing overhead costs.
4> The only job unfinished on January 31 was Job No. 151, for which total direct labor
charges were $5,200 (800 direct labor hours) and total direct material charges were
$14,000.
5> Cost of direct materials placed in production during January totaled $123,000. There
were no indirect material requisitions during January.
6> January 31 balance in raw materials inventory was $35,000.
7> Finished goods inventory balance on January 31 was $34,500.
Has manufacturing overhead been overallocated or underallocated and by what amount
as of January 31?
A) $26,200 overallocated
B) $26,200 underallocated
C) $17,000 overallocated
D) $17,000 underallocated
36) Management at the Forrest Company currently sells its products for $225 per unit
and is contemplating a 40% increase in the selling price for the next year. Variable costs
are currently 25% of sales revenue and are not expected to change in dollar amount on a
per unit basis next year (the company will still pay the same variable cost per unit).
Fixed expenses are $120,750 per year.
If fixed costs were to decrease 10% during the current year and the new selling price
goes into effect, how many units will need to be sold to breakeven?
A) 420 units
B) 358 units
C) 908 units
D) 132,825 units
37) A company should ________ when making a short-term special decision.
A) focus on qualitative factors only
B) focus on quantitative factors only
C) separate variable costs from fixed costs
D) use a traditional direct costing approach
38) Manufacturing overhead costs for a product include
A) direct material
B) operating expenses
C) indirect manufacturing costs
D) prime costs
39) Changing the product mix emphasis in the short run will usually not affect
A) total variable costs
B) both total variable and total fixed costs
C) total fixed costs
D) total contribution margin
40) Hummingbird Manufacturing manufactures small parts and uses an activity-based
costing system.
The following parts were produced in October with the following information:
Total packaging fees for all three parts is
A) $11,000
B) $33,000
C) $ 6,250
D) $ 5,100
41) The ________ budget is part of the financial budgets.
A) production
B) budgeted income statement
C) budgeted balance sheet
D) sales
42) According to the textbook, managerial accountants often work on
A) cross-functional teams
B) workgroups
C) audit teams
D) multi-functional teams
43) The Warren Company is considering investing in two alternative projects:
What is the payback period for Project 1?
A) 4.00 years
B) 5.56 years
C) 16.00 years
D) 8.89 years
44) Roman Company is preparing its cash budget for the upcoming month. The
budgeted beginning cash balance is expected to be $40,000. Budgeted cash receipts are
$101,000, while budgeted cash disbursements are $123,000. Roman Company wants to
have an ending cash balance of $45,000. How much would Roman Company need to
borrow to achieve its desired ending cash balance?
A) $18,000
B) $27,000
C) $23,000
D) $63,000