For Years 1’“5, a proposed expenditure of $500,000 for a fixed asset with a 5-year life
has expected net income of $40,000, $35,000, $25,000, $25,000, and $25,000,
respectively, and net cash flows of $90,000, $85,000, $75,000, $75,000, and $75,000,
respectively. The cash payback period is 5 years.
a. True
b. False
Answer:
Mallard Corporation uses the product cost concept of product pricing. Below is cost
information for the production and sale of 45,000 units of its sole product. Mallard
desires a profit equal to a 12% rate of return on invested assets of $800,000.
The cost per unit for the production of the company’s product is
a. $13.15
b. $17.22
c. $15.40
d. $15.75
Answer:
Businesses that are separated into two or more manageable units in which managers
have authority and responsibility for operations are said to be
a. decentralized
b. consolidated
c. diversified
d. centralized
Answer:
Another name for variable costing is:
a. indirect costing
b. process costing
c. direct costing
d. differential costing
Answer:
Controllable expenses are those that can be influenced by the decisions of the profit
center management.
a. True
b. False
Answer:
The numerator of the rate earned on common stockholders’ equity ratio is
a. net income
b. net income minus preferred dividends
c. income before income tax
d. operating income minus interest expense
Answer:
The percentage analysis of increases and decreases in individual items in comparative
financial statements is called
a. vertical analysis
b. solvency analysis
c. profitability analysis
d. horizontal analysis
Answer:
The objective of transfer pricing is to encourage each division manager to transfer
goods and services between divisions if overall company income can be increased by
doing so.
a. True
b. False
Answer:
(Actual quantity ‘“ Standard quantity) × Standard price
Match the following formulas or descriptions with the term (a-e) it defines.
a. Direct materials price variance
b. Direct labor rate variance
c. Direct labor time variance
d. Direct materials quantity variance
e. Budgeted variable factory overhead
Answer:
The following information pertains to Diane Company. Assume that all balance sheet
amounts represent both average and ending balance figures and that all sales were on
credit.
Assets
Liabilities and Stockholders’ Equity
Income Statement
What is the ratio of sales to total assets for Diane Company?
a. 1.00
b. 2.94
c. 0.18
d. 0.34
Answer:
The best measure of managerial efficiency in the use of investments in assets is
a. rate of return on stockholders’ equity
b. investment turnover
c. income from operations
d. inventory turnover
Answer:
When several alternative investment proposals of the same amount are being
considered, the one with the largest net present value is the most desirable. If the
alternative proposals involve different amounts of investment, it is useful to prepare a
relative ranking of the proposals by using a(n)
a. average rate of return index
b. consumer price index
c. present value index
d. price-level index
Answer:
If Division Inc. expects to sell 200,000 units in the current year, desires ending
inventory of 24,000 units, and has 22,000 units on hand as of the beginning of the year,
the budgeted volume of production for the year is 202,000 units.
a. True
b. False
Answer:
If the volume of sales is $6,000,000 and sales at the break-even point amount to
$4,800,000, the margin of safety is 25%.
a. True
b. False
Answer:
Motel Corporation is analyzing a capital expenditure that will involve a cash outlay of
$208,240. Estimated cash flows are expected to be $40,000 annually for 7 years. The
present value factors for an annuity of $1 for 7 years at interest of 6%, 8%, 10%, and
12% are 5.582, 5.206, 4.868, and 4.564, respectively. The internal rate of return for this
investment is
a. 10%
b. 6% c. 12%
d. 8%
Answer:
Flagler Company allocates overhead based on machine hours. It estimated overhead
costs for the year to be $420,000. Estimated machine hours were 50,000. Actual hours
and costs for the year were 46,000 machine hours and $380,000 of overhead.
Answer:
Good Night manufactures comforters. The estimated inventories on January 1 for
finished goods, work in process, and materials were $51,000, $28,000, and $33,000,
respectively. The desired inventories on December 31 for finished goods, work in
process, and materials were $48,000, $35,000, and $29,000, respectively. Direct
material purchases were $555,000. Direct labor was $252,000 for the year. Factory
overhead was $176,000. Prepare a cost of goods sold budget for Good Night, Inc.
Answer:
A business had a margin of safety ratio of 20%, variable costs of 75% of sales, fixed
costs of $240,000, a break- even point of $960,000, and operating income of $60,000
for the current year. Calculate the current year’s sales.
Answer:
Connally Company’s payroll department required that every time card be checked twice
to ensure pay accuracy. The company has 1,000 employees and has determined that the
checks cost the company $8,000 per year. They have decided to change this policy and
only check those names which appear on the exceptions report and a random check on
the entire payroll. Currently only 15% of the payroll is evaluated each payroll.
Determine the inspection activity cost per employee on the 1,000 employees both
before and after the improvement.
Answer:
Differentiate between financial and managerial accounting, addressing such issues as
users, nature of information, guidelines for preparation, timeliness and focus of
reporting.
Answer:
(Hint: Determine units produced at normal capacity.)
Answer:
