Worbel Company has variable costs of $5 per unit and a selling price of $10 per unit.
Fixed costs are $100,000. Planned unit sales for 2015 are 25,000 units. Actual unit sales
for 2014 were 22,000. What is the margin of safety in dollars for 2015?
A) $5,000
B) $20,000
C) $30,000
D) $50,000
Lorna Company reported the following information about the production and sale of its
only product during the first month of operations:
Selling price per unit $65
Sales $78,000
Direct materials used $25,000
Direct labor $35,000
Variable factory overhead $15,000
Fixed factory overhead $10,000
Variable selling and administrative expenses $3,000
Fixed selling and administrative expenses $5,000
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 1,200 units
Under variable costing, the cost of ending inventory of finished goods is ________.
A) $35,000
B) $37,500
C) $39,000
D) $42,500
In two-stage activity-based costing systems, the cost objects in the first stage are
________ and the cost objects in the second stage are ________.
A) departments; products or services
B) departments; territories
C) resources; departments
D) activities; products or services
The Computer Department in a large company provides services to many departments.
The cost driver for costs in the Computer Department is the number of computer hours.
When allocating fixed costs of the Computer Department to a user department such as
Department A, which of the following formulas is used?
A) budgeted fixed cost × (budgeted hours to be used by Department A/total available
capacity hours of Computer Department)
B) budgeted fixed cost × (actual hours used by Department A/total available capacity
hours of Computer Department)
C) actual fixed cost × (budgeted hours to be used by Department A/total available
capacity hours of Computer Department)
D) actual fixed cost × (actual hours used by Department A/total available capacity
hours of Computer Department)
When allocating indirect production costs to cost objects, most cost-allocation bases are
________.
A) assigned to a cost object
B) accumulated for a cost object
C) traced to the cost object
D) cost drivers
When an automobile made in a Toyota factory is the cost object, the wages of the
security guard in the factory would probably be classified as a(n) ________.
A) direct production cost
B) indirect production cost
C) direct nonproduction cost
D) indirect nonproduction cost
St. Matthew’s Hospital uses a job-order costing system for all patients who have
surgery. The following information is available:
Budgeted indirect costs—pre-operating room $84,000
Budgeted indirect costs—operating room $66,000
Budgeted indirect costs—surgery recovery floor $600,000
Budgeted nursing hours—pre-operating room 4,000
Budgeted nursing hours—operating room 1,000
Budgeted nursing hours—surgery recovery floor 7,500
The cost driver for all indirect costs is nursing hours. The hospital uses a budgeted rate
for indirect costs. The budgeted rate for indirect costs for the pre-operating room is
________.
A) $21.00
B) $43.25
C) $66.00
D) $80.00
Using absorption costing, the primary classifications of costs on the income statement
are by ________.
A) cost behavior patterns
B) manufacturing departments
C) major management functions
D) manufacturing segments
Zemrowski Company has the following data available:
Credit Sales for the year ended December 31, 2015 $500
Cash Sales for the year ended December 31, 2015 $400
Cost of Goods Sold for the year ended December 31, 2015 $290
Total Accounts Receivable, December 31, 2015 $200
Total Accounts Receivable, December 31, 2014 $100
Total Inventory, December 31, 2015 $200
Total Inventory, December 31, 2014 $250
What is the average collection period for the fiscal year ending December 31, 2015?
A) 110 days
B) 150 days
C) 220 days
D) 283 days
A five-year MACRS asset that cost $50,000 was sold at the end of its useful life for
$20,000. The book value of the asset at the time of sale was $0. The asset had no
expected terminal value. The tax rate is 20%. What is the net after-tax cash effect from
the sale of the asset?
A) $16,000 cash inflow
B) $16,000 cash outflow
C) $24,000 cash inflow
D) $24,000 cash outflow
Segment contribution margin less ________ describes the segment contribution that is
controllable by segment managers.
A) fixed costs controllable by segment managers
B) fixed costs controlled by others(not segment managers)
C) unallocated costs
D) uncontrollable costs
Which of the following is(are) a deficiency(deficiencies) of cash-basis accounting?
A) it omits key revenues and expenses from the balance sheet
B) it fails to match revenues and expenses to measure economic performance
C) it omits key assets and key liabilities from the balance sheet
D) B and C
Which of the following costs can be canceled in the short run?
A) salary of CEO of company
B) mortgage payment on factory building
C) lease payments on two-year lease for leased equipment in factory
D) management consulting services engaged to change company logo
Operating income divided by sales is ________.
A) residual income
B) capital turnover
C) return on investment
D) return on sales
A small appliance manufacturer is deciding whether to accept or reject a special order
for 1,750 appliances. There is sufficient capacity available for the special order. What is
relevant information for the decision whether to accept or reject the special order?
A) the cost of the parts for the 1,750 appliances
B) the supervisor’s salary in the production area
C) the depreciation on assembly equipment
D) the accountant’s salary
Kemp Company manufactures three products from a joint process. Joint costs for the
year amounted to $250,000. The following data was available:
Product Units Produced Sales Value at Split-off
X 5,000 $70,000
Y 3,000 $30,000
Z 2,000 $100,000
Assume the relative-sales-value method of allocating joint costs is used. What amount
of joint costs is allocated to Product Y?
A) $30,000
B) $37,500
C) $75,000
D) $250,000
Consider the following linear mixed-cost function:
Y = $110,000 + $5.50X
Where: Y = total annual custodial cost
X = number of patient-days
What does the $5.50 represent?
A) total fixed cost
B) total variable cost
C) fixed cost per patient-day
D) variable cost per patient-day
Which statement about TQM is FALSE?
A) TQM focuses on product quality.
B) TQM minimizes costs by maximizing quality.
C) TQM focuses on the prevention of defects and on customer satisfaction
D) Management accountants have no role in the application of TQM.
Assume the following facts for two products, Zip and Zap:
Zip Zap
Sales mix 3 units 1 unit
Selling price per unit $21.00 $28.00
Variable costs per unit $14.00 $16.00
If total fixed costs are $132,000, the break-even point in units would be ________.
A) 4,000 units of Zip and 12,000 units of Zap
B) 1,200 units of Zip and 400 units of Zap
C) 12,000 units of Zip and 4,000 units of Zap
D) 8,400 units of Zip and 2,800 units of Zap
Benton Company manufactures a part for its production cycle. The costs per unit for
38,000 units of the part are as follows:
Per Unit
Direct materials $3.00
Direct labor 5.00
Variable factory overhead 3.00
Fixed factory overhead 4.00
Total costs $15.00
The fixed factory overhead costs are unavoidable. Assume no other use for the
facilities. What is the highest price Benton Company should pay for the part from an
outside supplier?
A) $8
B) $11
C) $12
D) $15
The contribution approach to the income statement offers several benefits to decision
makers. Which of the following is NOT a benefit of this approach?
A) This approach makes it easier to understand the impact of changes in sales volume
on operating income.
B) This approach stresses the role of fixed costs in operating income.
C) This approach is used with CVP analysis.
D) This approach is accepted by U.S. Generally Accepted Accounting Principles.
Lakers Company produces two products. The following information is available:
Product X Product Y
Selling price per unit $46 $36
Variable cost per unit $38 $24
Total fixed costs are $234,000. Lakers plans to sell 21,000 units of Product X and 7,000
units of Product Y.
Required:
A) Compute the contribution margin for each product.
B) What is the expected net income?
C) Assume the sales mix is 3 units of Product X for every 1 unit of Product Y.
What is the break-even point in units for each product?
D) Assume the sales mix is 3 units of Product X for every 2 units of Product Y.
What is the break-even point in units for each product?
The ________ is mainly concerned with the company’s operating matters whereas the
________ is mainly concerned with the company’s financial matters.
A) treasurer; controller
B) controller; treasurer
C) managerial accountant; financial accountant
D) chief executive officer; chief financial officer
Which of the following assets is NOT classified as a short-term investment?
A) corporate stocks
B) corporate bonds
C) debt securities issued by governments
D) checking account balance
A plant asset with a book value of $160,000 is sold for $100,000. The applicable tax
rate is 20%. What is the net after-tax cash inflow resulting from the sale?
A) $12,000 cash inflow
B) $88,000 cash inflow
C) $100,000 cash inflow
D) $112,000 cash inflow
Under the equity method of accounting for investments, the investor recognizes income
for ________.
A) the investor’s share of income earned by the investee company
B) dividends received from the investee company
C) the change in market value of the investee company’s stock
D) the amortization of goodwill associated with the investee company
Christian Company has the following data available:
Dividends declared in 2015 $8,000
Retained Earnings, December 31, 2014 $30,000
Net income for the year ended December 31, 2015 $14,000
Paid-in Capital, December 31, 2014 $29,000
Paid-in Capital, December 31, 2015 $26,000
What is the company’s total stockholders’ equity on December 31, 2015?
A) $36,000
B) $46,000
C) $62,000
D) $101,000
Gonzalez Company has two service departments, Maintenance and Human Resources.
Gonzalez Company also has two production departments, Mixing and Finishing.
Maintenance costs are allocated based on square footage while Human Resources costs
are allocated based on number of employees. The following information has been
gathered for the current year:
Human
Maintenance Resources Mixing Finishing
Direct costs $126,000 $84,000 $105,000 $175,000
Square footage 800 400 1,600 1,200
Number of employees 8 12 24 32
Assume the step-down method is used to allocate service department costs, and the
Maintenance Department is allocated first. The amount of cost allocated from the
Maintenance Department to the Finishing Department would be ________.
A) $31,500
B) $42,750
C) $47,250
D) $57,000
The cash received from the sale of bonds payable is included in the ________ section of
the statement of cash flows.
A) operating
B) investing
C) financing
D) noncash
How can a company avoid lying by employees when preparing a budget?
A) reward good budget forecasts
B) reward good performance against the budget
C) reward good budget forecasts and reward good performance against the budget
D) reward good recipes for cooking the books
The cost driver chosen for applying factory overhead costs should be the cost driver
that ________.
A) is easiest to understand
B) incurs the least administrative costs
C) is easiest to calculate
D) causes most of the overhead costs
Each value chain function should focus on activities that ________.
A) create profits for the seller
B) create bonuses for top management
C) create higher stock prices for the company’s stock
D) create value for the customer