The Bombard Company reports the following information:
Sales for the year ended December 31, 2012 $106,950
Gross profit for the year ended December 31, 2012 $45,150
Net income for the year ended December 31, 2012 $10,300
Total Current Assets, December 31, 2012 $18,700
Total Current Liabilities, December 31, 2012 $7,600
Total Assets, December 31, 2012 $48,400
Total Liabilities, December 31, 2012 $20,850
Total common shares outstanding, December 31, 2012 1,000
Market price per share, December 31, 2012 $75.00
Dividends per share, for the year ended December 31, 2012 $5.00
What is the return on sales for the year ended December 31, 2012?
A) 6.8%
B) 9.6%
C) 25.8%
D) 42.2%
The following information is available for the Stanley Company:
Sales for year $1,000,000
Average invested capital for year $312,500
Return on investment 20%
What is the operating income?
A) $62,500
B) $100,000
C) $312,500
D) $687,500
Jones Company manufactures greeting cards. Material is introduced at the beginning of
the process in the Printing Department. Conversion costs are applied uniformly
throughout the process. The weighted-average method of process costing is used. Data
for the Printing Department for the month of September follow:
Work-In-Process Inventory, September 1:
Units 22,500
Direct materials (100% complete) $51,000
Conversion costs (30% complete) $20,472
Units started in September 127,500
Units completed in September 123,000
Work-In-Process Inventory, September 30 27,000
Direct materials added in September $427,500
Conversion costs added in September $315,000
With regard to the Work-In-Process Inventory on September 30, materials are 100
percent complete and conversion costs are 60 percent complete. The equivalent units
for materials are ________.
A) 125,000
B) 145,500
C) 150,000
D) 154,500
Marian Industries Inc. reported the following information about the production and sale
of its only product during the first month of operations:
Selling price per unit $100.00
Sales $100,000
Direct materials used $37,500
Direct labor $36,000
Variable factory overhead $25,500
Fixed factory overhead $20,000
Variable selling and administrative expenses $2,000
Fixed selling and administrative expenses $7,500
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 1,200 units
Under variable costing, what is the cost of the finished goods ending inventory?
A) $48,000
B) $50,000
C) $54,000
D) $58,000
Suppose Sunnyside Hotel has annual fixed costs applicable to its rooms of $1.0 million
for its 300-room hotel. Average daily room rents are $60 per room, and average variable
costs are $10 for each room rented. It operates 365 days per year. What is the
break-even point in number of rooms rented?
A) 20,000
B) 30,000
C) 100,000
D) 120,000
Jorgensen Company used least squares regression analysis to obtain the following
output:
Maintenance Department Cost
Explained by Number of Labor Hours
Constant 8,200
Standard error of Y estimate 630
R2 0.94
No. of observations 20
Degrees of freedom 18
X coefficient 2.21
Standard error of coefficient 0.0966
Required:
A) What is the total fixed cost of the maintenance department?
B) What is the variable cost per labor hour for the maintenance department?
C) What is the linear cost function?
D) What is the coefficient of determination? Comment on the goodness of fit.
Jensen Company produces dolls. Each doll sells for $20.00. Variable costs are $14.00
per unit. If the break-even volume in dollars is $1,446,000, then the total fixed costs for
the period are ________.
A) $361,500
B) $433,800
C) $516,425
D) $1,446,000
Consider the following linear mixed-cost function:
Y = $120,000 + $2.70X
Where: Y = total annual maintenance cost
X = number of patient-days
What does the $120,000 represent?
A) variable cost per patient-day
B) total variable cost
C) fixed cost per patient-day
D) total fixed cost
Jerome Company purchased common stock in Gonzalez Company. Jerome Company
treats the investment as available-for-sale securities. During the current year, Gonzalez
Company earned $4,000,000 and paid dividends of $1,000,000. Assume that Jerome
Company owns 10% of the outstanding shares of Gonzalez Company. Gonzalez
Company’s dividend will affect Jerome Company by ________.
A) increasing cash and investments by $100,000
B) increasing investments and investment revenue by $100,000
C) increasing cash and investment revenue by $100,000
D) increasing cash and decreasing investments by $100,000
The cash paid to purchase equipment is included in the ________ section of the
statement of cash flows.
A) operating
B) investing
C) financing
D) noncash
Goodwill from the purchase of another company appears on the consolidated balance
sheet as a ________.
A) stockholders’ equity item
B) part of the Investment in subsidiary
C) separate intangible asset account
D) component of other comprehensive income
Account analysis and engineering analysis will remain the ________ methods of
measuring cost behavior because the other methods ________.
A) unused; are more objective
B) unused; are more accurate
C) popular; require more past cost data
D) popular; are too difficult to work with
Customers with a low cost to serve have ________.
A) small order quantities
B) many order changes
C) large amount of pre-sales support
D) small amount of post-sales support
Randy Company has obtained the following data for the first year of operations:
Sales $2,868,750
Direct materials and labor $1,125,000
Variable manufacturing overhead $431,250
Fixed manufacturing overhead $656,250
Variable selling expenses $337,500
Fixed selling expenses $131,250
Units produced 125,000
Units sold 112,500
Units expected to be produced 125,000
Required:
A) Using variable costing, prepare an income statement for the first year of operations.
Assume budgeted fixed costs were equal to actual fixed costs.
B) Using absorption costing, prepare an income statement for the first year of
operations. Assume budgeted fixed costs were equal to actual fixed costs.
Bonneville Company is producing a subassembly used in the production of a product.
The costs incurred for the subassembly follow:
Per Unit
Direct materials $6.00
Direct labor 4.00
Variable factory overhead 1.00
Fixed supervisor salary 3.00
Depreciation expense on factory equipment 2.00
General fixed factory overhead allocated 5.00
Total costs $21.00
The above per unit costs are based on 8,000 units. An outside supplier will provide
8,000 subassemblies for $19 per unit. The supervisor will be terminated if the
subassemblies are not produced in house. The idle factory will be used to manufacture
another product with a contribution margin of $60,000. What should Bonneville do?
A) make the subassemblies and save $20,000
B) make the subassemblies and save $40,000
C) buy the subassemblies and save $20,000
D) buy the subassemblies and save $40,000
Which of the following statements about the establishment of transfer prices for internal
sales and purchases between segments is FALSE?
A) In decentralized organizations, transfer pricing policy sometimes leads to
dysfunctional decisions.
B) There is seldom a perfect transfer pricing policy.
C) Organizations use a variety of methods to determine transfer prices.
D) In centralized organizations, segment managers set transfer prices.
Paulson Company’s expected sales for April are $29,000. Other information follows:
Budgeted Operating Expenses Amount
Wages $4,000
Advertising 1,680
Depreciation 1,440
Rent 2,560
Promotion 5% of sales
What are the total expected operating expenses for April?
A) $6,240
B) $9,680
C) $9,690
D) $11,130
In return on investment calculations, we should measure invested capital ________
because ________.
A) at the end of the period; it is easiest
B) at the end of the period; income is measured at the end of the period
C) at the beginning of the period; it is a lead indicator
D) as an average for the period under review; income is measured over a period of time
Garcia Company planned to produce 12,000 units. This level of activity required 40
setups at a cost of $18,000 plus $500 per setup. Actual production was 10,000 units,
requiring 15 setups. Actual setup cost was $26,000. What is the static budget amount
for total setup costs?
A) $21,000
B) $25,500
C) $26,000
D) $38,000
The preferred cost allocation base that can be used to allocate central corporate support
costs to products is ________.
A) sales
B) cost of goods sold
C) total assets
D) a measure of usage
Which of the following statements is FALSE about a strategic plan?
A) A strategic plan does not deal with a specific time period.
B) A strategic plan does not produce forecasted financial statements.
C) A strategic plan guides day-to-day operations.
D) A strategic plan provides an overall framework for a long-range plan.
The annual after-tax cash operating inflows of a newly purchased machine are expected
to be $60,000. The expected useful life of the machine is 5 years. The after-tax
minimum desired rate of return, including an inflation factor, is 25%. The inflation rate
is 10% per year. What is the annual after-tax cash operating inflow for year 1 for the
machine?
A) $54,000
B) $60,000
C) $66,000
D) $75,000
In a make-or-buy decision for a part for a product, which of the following qualitative
factors play a role?
A) quality of purchased part
B) credit terms offered by supplier of part
C) timeliness of delivery of purchased part by supplier
D) all of the above
Under the ABC approach to cost allocation, which of the following steps is NOT used
in allocating costs to products?
A) Determine the key components of the system and the relationship among them.
B) Calculate and interpret the new ABC information.
C) Collect relevant data concerning costs and the physical flow of cost-allocation base
units among resources and activities.
D) Select cost pools and cost-allocation bases in each producing department and assign
all indirect costs to the appropriate cost pool.
The acquisition of inventory on account will ________.
A) increase assets and decrease stockholders’ equity
B) decrease assets and decrease liabilities
C) increase assets and increase liabilities
D) increase assets and increase stockholders’ equity
Stanley Company applies overhead based on machine hours. The following data was
available:
Budgeted factory overhead costs $280,000
Budgeted machine hours 20,000
Actual factory overhead costs $292,000
Actual machine hours 19,050
Cost of goods sold $560,000
Direct materials inventory, ending balance $60,000
Work-in-process inventory, ending balance $190,000
Finished goods inventory, ending balance $250,000
Required:
A) Compute the budgeted factory overhead rate.
B) Compute the underapplied or overapplied factory overhead.
C) Under the immediate write-off approach to overhead variances, how would you
dispose of the overhead variance?
D) If the immediate write-off approach to overhead variances is not used, how would
you dispose of the overhead variance?
The balance sheet for Ramon Company is given below:
Cash $242
Accounts Receivable 194
Inventory 450
Prepaid Insurance 76
Fixed Assets 390
Accumulated Depreciation (228)
Total Assets $1,124
Accounts payable $152
Wages payable 32
Notes payable 420
Paid-in capital 160
Retained earnings 360
Total liabilities and stockholders’ equity $1,124
If a common-size balance sheet was prepared, what would Ramon Company report for
inventory?
A) 13.5%
B) 25.2%
C) 34.5%
D) 40.0%
LIFO uses the ________ costs to measure the ending inventory.
A) latest
B) earliest
C) average
D) weighted-average
In the immediate write-off of overhead variances, underapplied overhead is regarded as
a(n) ________.
A) addition to the cost of inventory
B) deduction from the cost of inventory
C) decrease in cost of goods sold
D) increase in cost of goods sold
The degree of operating leverage for Geesling Company is 8.0 at 80,000 units of sales.
At 80,000 units of sales, the net profit is $10,000. If the sales volume increases to
90,000 units, what is the net profit?
A) $12,000
B) $20,000
C) $22,222
D) $80,000
Moody Company has the following information available for the most current year:
Paid-in capital, January 1, 2014 $475,000
Retained earnings, January 1, 2014 $100,000
Total revenues in 2014 $870,000
Total expenses in 2014 $550,000
Dividend declared in 2014 $70,000
Dividend paid in 2014 $0
Investments by owners in 2014 $10,000
What was the total amount of stockholders’ equity for Moody Company at December
31, 2014?
A) $250,000
B) $350,000
C) $485,000
D) $835,000
In managerial accounting, ________ can be a reasonable approximation of marginal
cost in many situations.
A) fixed cost
B) mixed cost
C) step cost
D) variable cost
Cost-based transfer prices are easy to implement but can lead to ________ decisions.
A) questionable
B) negotiated
C) dysfunctional
D) autonomous