1) Currently, the SEC does not require publicly-held corporations to disclose the costs
related to remediation of contaminated sites.
2) The hurdle rate is the length of time it takes to recoup an investment’s initial cost
from the cash inflows that investment generates.
3) Management can use job cost information to help to determine how it will deal with
pricing pressure from competitors.
4) If a company has no ending work in process inventory, it does not need to use the
5-step process costing procedure to determine the cost of making one unit.
5) Managerial accounting information emphasizes relevance over reliability and
objectivity.
6) Value-added activities are activities that could be reduced or removed from the
process with no ill effect on the end product or service.
7) If inventory has grown, operating income will be higher under absorption costing
than it is under variable costing.
8) The breakeven point is the sales level where operating income is positive.
9) Using departmental overhead rates is generally less accurate than using a single
plantwide overhead rate.
10) Equivalent units express the amount of work done during a period of time in terms
of fully completed units of output.
11) In calculating the net present value of an investment in equipment, the required
investment and its residual value should be subtracted from the present value of all
future cash inflows.
12) The sales mix cannot significantly affect CVP relationships.
13) If the expected increase in revenues from a special order is greater than the
expected increase in variable and fixed costs, then the special order should be accepted.
14) The weighted average and FIFO methods differ only in how they treat beginning
inventory.
15) Decision making is guided only by differential costs.
16) The two basic types of costing systems are
A) product costing and materials inventory costing
B) periodic costing and perpetual costing
C) job costing and process costing
D) periodic costing and process costing
17) Here is selected data for Lori Corporation:
The journal entry to transfer completed goods to the finished goods inventory account
would include a
A) debit to work in process inventory for $233,500
B) debit to finished goods inventory for $237,500
C) credit to work in process inventory for $237,500
D) debit to finished goods for $233,500
18) Comparing actual results to budgets is an example of which of the following
management functions?
A) Analyzing
B) Planning
C) Controlling
D) Directing
19) Shiloh Company uses a job costing system. The company’s schedule of cost of
goods manufactured showed the following amounts for September.
Manufacturing overhead cost is allocated at the rate of $11 per direct labor hour.
What is the amount of allocated manufacturing overhead costs for the month?
A) $24,000
B) $63,000
C) $16,500
D) $25,500
20) Which term below is best paired with “a summarized budget that can easily be
computed for several volume levels”?
A) Flexible budget
B) Sales volume variance
C) Benchmarking
D) Overhead flexible budget variance
21) Fun Stuff Manufacturing produces frisbees using a three-step process that includes
molding, coloring and finishing. Which of the following accounts is credited when
material requests are filled?
A) Finished goods inventory
B) WIP inventoryfinishing
C) Raw materials inventory
D) Manufacturing overhead
22) Selected information regarding a company’s most recent quarter follows (all data in
thousands).
What was cost of goods sold?
A) $1,100
B) $1,900
C) $1,450
D) $1,000
23) All else being equal, a company would choose to invest in a capital asset if which of
the following is TRUE?
A) If the payback period equals the amount invested
B) If the expected accounting rate of return is less than the required rate of return
C) If the expected accounting rate of return is greater than the required rate of return
D) If the average amount invested is equal to the net cash inflows
24) Cruise Company produces a part that is used in the manufacture of one of its
products. The unit manufacturing costs of this part, assuming a production level of
6,000 units, are as follows:
Assume Cruise Company can purchase 6,000 units of the part from Suri Company for
$14.00 each, and the facilities currently used to make the part could be used to
manufacture 6,000 units of another product that would have an $8 per unit contribution
margin. If no additional fixed costs would be incurred, what should Cruise Company
do?
A) Make the new product and buy the part to earn an extra $5.00 per unit contribution
to profit
B) Make the new product and buy the part to earn an extra $6.00 per unit contribution
to profit
C) Continue to make the part to earn an extra $2.00 per unit contribution to profit
D) Continue to make the part to earn an extra $4.00 per unit contribution to profit
25) An organization faces many challenges when implementing an environmental
accounting (EMA) system. Which of the following inherent challenges must an
organization overcome when the costs associated with hazardous materials disposal are
combined with other overhead costs in its accounting system?
A) Hidden cost
B) Communication issue
C) Newness of EMA
D) Historical orientation of accounting
26) Platinum Company manufactures several different products and uses an
activity-based costing system. Information from its system for the year for all products
follows:
The annual production and sales of one of its products, the Zinger, are 800 units. The
following data relate to the production and sales of Widgets in the most recent year:
What is the average cost of one Zinger?
A) $ 25.01
B) $158.19
C) $236.70
D) $208.21
27) Financial accounting information focuses on historical transactions and rarely
includes future-oriented costs. For an EMA system to be effective in helping
management make good decisions, it will need to include
A) a more close-minded and historically focused definition of cost
B) hiring new management
C) a more open-minded and forward-looking definition of cost
D) None of the above
28) Matthew’s Fish Fry has a monthly target operating income of $7,200. Variable
expenses are 60% of sales and monthly fixed expenses are $1,800. What is the monthly
margin of safety in dollars if the business achieves its operating income goal?
A) $22,500
B) $18,000
C) $27,000
D) $13,500
29) When predicting costs at other volumes using a cost equation derived from either
the high-low method or regression analysis, managers should consider
A) outliers
B) general inflation
C) seasonality
D) all of the above
30) The lost profits from lost customers are an example of what type of cost?
A) Prevention costs
B) Internal failure costs
C) External failure costs
D) Appraisal costs
31) Maple Company uses a job costing system. Maple Company’s schedule of cost of
goods manufactured showed the following amounts for the month ended August 31 .
Manufacturing overhead cost is allocated at the rate of $13 per direct labor hour.
What is the amount of allocated manufacturing overhead costs for August?
A) $42,000
B) $75,000
C) $124,000
D) $39,000
32) Quinton’s Salon cuts men’s hair. Labor standards for each cut are as follows:
The following data relates to the haircuts during the month of October:
What is the labor efficiency variance for the month of October?
A) $4 favorable
B) $4 unfavorable
C) $100 favorable
D) $100 unfavorable
33) London Ceramics makes custom ceramic tiles. During March, the company started
and finished Job #266. Job #266 consists of 2,500 tiles; each tile sells for $12.00. The
company’s records show the following direct materials were requisitioned for Job #266.
Basic terra cotta tiles: 2,500 units at $4.00 per unit
Specialty paint: 5 quarts at $7.00 per quart
High gloss glaze: 4 quarts at $12.00 per quart
Labor time records show the following employees worked on Job #266:
Alice Cooper: 18 hours at $24 per hour
Matthew Kline: 20 hours at $13 per hour
Sierra Ceramics allocates manufacturing overhead at a rate of $27 per direct labor hour.
What is the total amount of direct materials, direct labor, and manufacturing overhead
that should be shown on Job #266’s job cost record?
A) $10,775
B) $1,026
C) $30,000
D) $11,801
34) Beartowne Enterprises uses an activity-based costing system to assign costs in its
auto-parts division.
The following units were produced in December with the following information:
Total packaging fees for all three parts is:
A) $21,250
B) $42,500
C) $11,875
D) $7,750
35) The net present value method assumes that the cash inflows from a project are
immediately reinvested at the
A) internal rate of return
B) accounting rate of return
C) market rate of return
D) required rate of return
36) Telecom uses activity-based costing to allocate all manufacturing conversion costs.
Telecom produces cellular telephones; each phone has $40.00 of direct materials,
includes 30 parts and requires 3 hours of machine time. Additional information follows:
What is the cost of materials handling per phone?
A) $42.00
B) $ 6.00
C) $15.00
D) $30.00
37) The following information for the past year for the Blaine Corporation has been
provided:
During the year, the company produced and sold 30,000 units of product at a selling
price of $15.00 per unit. There was no beginning inventory of product at the beginning
of the year.
What is the operating income (loss) for the year?
A) $281,000
B) $450,000
C) $262,000
D) $93,000
38) If a company uses the indirect method to prepare the statement of cash flows, how
will the adjustment to reflect the amount of cash payments to suppliers be presented on
the statement?
A) The adjustment will be for the increase or decrease in inventory for the period and
will adjust net income in the operating activities section
B) The adjustment will be for the increase or decrease in accounts payable for the
period and will adjust net income in the operating activities section
C) The adjustment will be for the increase or decrease in accrued expenses for the
period and will adjust net income in the operating activities section
D) The adjustment will be for the increase or decrease in accounts receivable for the
period and will adjust net income in the operating activities section
39) At Hodgson Corporation, direct materials are added at the beginning of the process
and conversions costs are uniformly applied. Other details include:
What is the total cost of units completed and transferred out?
A) $610,150
B) $627,375
C) $562,639
D) $607,425
40) List the four areas of a balanced scorecard. Describe each area. Define “key
performance indicator” (KPI). Give an example of a KPI for each balanced scorecard
area
41) Which of the following represents the excess of the selling price per unit of a
product over the variable cost of obtaining and selling each unit?
A) Gross margin
B) Operating income
C) Net income
D) Unit contribution margin