What is the after-tax amount of annual cash operating savings associated with a
proposed machine?
A) operating savings times the tax rate
B) operating savings times (1 minus the tax rate)
C) $0
D) operating savings
The most recent income statement for the South Branch of First Financial Bank is
presented below:
Sales $57,000
Variable costs 31,500
Contribution margin 25,500
Avoidable fixed costs 13,500
Unavoidable fixed costs 18,000
Operating loss $(6,000)
First Financial Bank is thinking about eliminating the South Branch. If the branch is
eliminated, First Financial Bank’s operating income will ________.
A) increase by $6,000
B) increase by $25,500
C) decrease by $12,000
D) decrease by $31,500
The following information pertains to the Vertigo Company:
Total assets $150,000
Total current liabilities $110,000
Total expenses $70,000
Total liabilities $115,000
Total revenues $80,000
Return on sales equals ________.
A) 12.5%
B) 50.0%
C) 75.0%
D) 133.0%
Engineering analysis and account analysis are similar because ________.
A) both provide timely results
B) both do not develop a cost function
C) both provide more objective results than the high-low method
D) both require the subjective judgment of the analyst
Assume the net present value method is used to evaluate investment opportunities. A
manager is faced with several investments, but only has funding for one investment.
Which investment should be chosen?
A) the investment with the lowest net present value
B) the investment with a net present value equal to zero
C) the investment with a negative net present value
D) the investment with the largest net present value
Goodwill remains on a company’s books until ________.
A) accountants amortize it
B) accountants depreciate it
C) management sells it
D) management determines its value is impaired
Which of the following is NOT a component of the operating budget?
A) capital budget
B) purchases and cost of goods sold budget
C) budgeted income statement
D) operating expense budget
The following information is available for Company ZZ:
Sales $1,000,000
Variable Selling Expenses 22,000
Fixed Selling Expenses 33,000
Variable Administrative Expenses 30,000
Fixed Administrative Expenses 10,000
Variable Cost of Goods Sold 400,000
Fixed Cost of Goods Sold 100,000
If sales increase to $1,500,000, what is operating income?
A) $405,000
B) $500,000
C) $548,000
D) $679,000
LL Company produces and sells a product that has variable costs of $9 per unit and
fixed costs of $200,000 per year. If production decreases from 50,000 to 40,000 units,
the total cost per unit will ________.
A) increase by $1
B) increase by $13
C) decrease by $1
D) decrease by $14
Corless Company processes copper ore into two products, C and U. The ore costs $5
per pound and conversion costs are $15 per pound. Corless Company plans to produce
40,000 pounds of Product C and 20,000 pounds of Product U from 60,000 pounds of
ore. Product C sells for $30 per pound and Product U sells for $40 per pound. Assume
the company uses the physical-units method of allocating joint costs. What amount of
joint costs is allocated to Product C?
A) $0
B) $200,000
C) $600,000
D) $800,000
In job-order costing, a debit to Work-In-Process Inventory is used to record ________.
A) a requisition of direct materials for a job
B) the cost of labor used by a job
C) factory overhead applied to a job
D) all of the above
________ usually prepare and use the operating budget. ________ focus on the
financial budget.
A) Sales managers; the board of directors
B) Controllers and treasurers; line operating managers
C) Line operating managers; controllers and treasurers
D) The audit committee; the board of directors
A(n) ________ starts with the assumption that current activities in a company will not
automatically continue in the next period.
A) activity-based budget
B) strategic budget
C) master budget
D) zero-base budget
Wininger Company is preparing a cash budget for the month of June. The following
information is available:
Cash Balance, May 31, 2015 $20,000
Cash collections from customers in June 46,000
Cash paid for merchandise in June 42,000
Paid operating expenses in June 12,000
Purchase furniture for cash in June 3,000
Depreciation expense in June 2,000
Amortization expense in June 4,000
The minimum cash balance desired is $10,000. What is the deficiency of cash before
financing at June 30, 2015?
A) $(1,000)
B) $(3,000)
C) $(7,000)
D) $(11,000)
Which of the following is NOT an example of efficient performance?
A) Direct labor hours used per unit were less than expected.
B) Direct material used per unit was less than expected.
C) More outputs were achieved with less inputs than predicted.
D) More outputs were produced than expected.
The Cornell Company makes tables for which the following standards have been
developed:
Standard Inputs Expected Standard Price Expected
For Each Unit of Output Per Unit of Input
Direct Materials 10 pounds $4 per pound
Direct Labor 3 hours $16 per hour
Production of 200 tables was expected in July, but 220 tables were actually completed.
Direct materials purchased and used were 2,000 pounds at an actual price of $4.40 per
pound. Direct labor cost for the month was $10,620, and the actual pay per hour was
$18.00. What is the direct material quantity variance for July?
A) $800 Favorable
B) $800 Unfavorable
C) $880 Favorable
D) $880 Unfavorable
Santelle Company expects August sales to be $30,000. Approximately 40% of sales are
cash sales. Collection of credit sales are 50% in the month of sale, 40% in the month
following sale and 5% two months following sale. The remaining 5% is uncollectible.
________ is the expected cash collection in August from August sales.
A) $9,000
B) $12,000
C) $21,000
D) $36,000
When looking at a manufactured product, an example of an inventoriable cost is
________.
A) depreciation expense on office equipment in corporate office
B) insurance expense on vehicles used by sales staff
C) wages of plant security guard
D) clerical salaries in corporate office
Stanley Company has obtained the following information about a proposed project:
Annual cash operating savings (excluding depreciation)
for 5 years (end of year) $50,000
Depreciation expense per year for tax purposes $33,000
Estimated salvage value in 5 years $10,000
Cost of equipment $175,000
Required rate of return 10%
Income tax rate 40%
Estimated useful life (in years) 5
Depreciation method for tax purposes Straight-line
Present value of ordinary annuity of one
at 10% for 5 periods 3.7908
Present value of one at 10% for 5 periods 0.6209
Required:
A) What is the NPV of the project?
B) Should the project be undertaken?
To calculate the numbers in a flexible budget, managers use ________.
A) cost functions developed from regression analysis
B) flexible budget formulas
C) cost functions obtained from the high-low method
D) all of the above
If the net present value of an investment project is positive, then the project is
________. If the net present value of an investment project is negative, then the project
is ________.
A) ignored; accepted
B) desirable; undesirable
C) unacceptable; acceptable
D) rejected; accepted
The Lindsey Company used regression analysis to predict the annual cost of utilities.
The results were as follows:
Utilities Cost
Explained by Direct Labor Hours
Constant 5,000
Standard error of Y estimate 595
R-Squared 0.87
No. of observations 30
Degrees of freedom 28
X Coefficient 4.02
Standard error of coefficient 0.81
The linear cost function is ________ where Y = Total utilities cost and X = Number of
direct labor hours.
A) Y = $5,000 + $0.87X
B) Y = $5,000 + $0.81X
C) Y = $595 + $0.81X
D) Y = $5,000 + $4.02X
The following information is available for the Novin Company:
Net income for the year ended December 31, 2014 $177.4
Sales for the year ended December 31, 2014 1,606.0
Retained earnings, December 31, 2014 150.0
Retained earnings, December 31, 2013 180.0
Total assets, December 31, 2014 470.0
Total assets, December 31, 2013 442.0
Total liabilities, December 31, 2014 240.0
Total liabilities, December 31, 2013 182.0
What is the return on sales for the year ended December 31, 2014?
A) 2.9%
B) 7.9%
C) 11.0%
D) 33.9%
When managers make decisions, the decision process used has the following steps in
the order of occurrence:
A) Historical and Other Information, Prediction Model, Prediction, Decision Model,
Decision, Implementation, Feedback
B) Historical and Other Information, Decision Model, Prediction Method,
Implementation, Decision, Feedback
C) Historical and Other Information, Decision Model, Prediction Method, Decision,
Implementation, Feedback
D) Historical and Other Information, Prediction Method, Prediction, Decision Model,
Decision, Implementation, Feedback
Joshua Company produces and sells a product that has variable costs of $7 per unit and
fixed costs of $200,000 per year. If production increases from 20,000 units to 25,000
units, the total cost will ________.
A) increase by $35,000
B) decrease by $2 per unit
C) decrease by $8 per unit
D) stay the same
The ________ budget focuses on the budgeted income statement and the supporting
schedules.
A) financial
B) operating
C) operating expense
D) purchases and cost of goods sold
On January 1, 2012, a company paid $3,000 for rent. The rent covers the period January
1, 2012 through June 30, 2012. On June 30, 2012, the fiscal year end, the company
prepares an adjusting entry. What is the effect of this adjusting entry on stockholders’
equity?
A) increases
B) decreases
C) no effect
D) not enough information to determine
Operating leverage is the sensitivity of a firm’s ________ to changes in ________.
A) sales volume; the cost structure
B) margin of safety; ratio of fixed costs to variable costs
C) sales volume; the cost driver levels
D) net income; sales volume
The most effective budget processes facilitate communication from top management to
________ and from lower level managers and employees to ________.
A) the SEC; the audit committee
B) stockholders; creditors
C) lower level managers and employees; top management
D) creditors; stockholders
The Wolter Company has provided the following information:
Income tax rate 50%
Selling price per unit $6.60
Variable cost per unit $5.00
Total fixed costs $46,000.00
Required:
A) Compute the break-even point in units.
B) Compute the sales volume in units necessary to generate an after-tax net income of
$10,000.
C) Compute the sales volume in units necessary to generate an after-tax net income of
$20,000.