Division AA does not have excess capacity to produce Product XX. The division can
sell Product XX for $10 per unit outside the company. Variable costs are $6 per unit.
Division BB wants to purchase Product XX from Division AA to use in Product ZZ.
The selling price of Product ZZ is $25 per unit and variable costs to finish the product
after the transfer are $12 per unit. An outside supplier will sell Product XX for $12 per
unit. What is the minimum transfer price for Division AA?
A) $4 per unit
B) $6 per unit
C) $10 per unit
D) $12 per unit
Abbott Company sells desks at $480 per desk. The variable costs are $372 per desk.
Total fixed costs for the period are $456,840. The break-even volume in dollars is
________.
A) $456,840
B) $589,471
C) $1,573,560
D) $2,030,400
Comparing a company’s debt-to-equity ratio for 2014 to the debt-to-equity ratios for
2014 from other companies in the same industry is called a(n) ________.
A) time-series comparison
B) benchmark comparison
C) cross-sectional comparison
D) efficient ratio analysis
The immediate write-off of overhead variances is used because ________.
A) it is simpler
B) the company has probably sold most of the goods produced during the period so
prorating the variance to inventory accounts would not produce materially different
results
C) the extra overhead costs result from inefficiencies in the current period and therefore
do not represent assets
D) all of the above
Arkansas Company has no beginning and ending inventories, and has obtained the
following data for its only product:
Selling price per unit $65
Direct materials used $150,000
Direct labor $225,000
Variable factory overhead $140,000
Variable selling and administrative expenses $60,000
Fixed factory overhead $370,000
Fixed selling and administrative expenses $30,000
Units produced and sold 20,000
Assume there is excess capacity. There is a special order outstanding for 1,000 units at
$40.00 per unit. If Arkansas Company accepts the special order, net income would
________.
A) increase by $40,000
B) increase by $11,250
C) decrease by $28,750
D) decrease by $10,000
A factor that contributes to recording goodwill when acquiring control of another
company is ________.
A) outstanding management skills of parent company
B) unique product manufactured by parent company
C) established brand names by investee company
D) all of the above
A hospital radiology department has the following activities:
Activity Number Activity Description
1 Repair X-ray equipment
2 Taking X-ray with X-ray equipment
3 Wait time between patients
4 Repeating an X-ray because the X-ray technician forgot to
load the film in the X-ray equipment
Which activity is a value-added activity?
A) Activity 1
B) Activity 2
C) Activity 3
D) Activity 4
Management-by-exception means that managers should ________.
A) concentrate on areas that deviate from the plan
B) in the absence of other evidence, presume that areas that conform with plans are
running smoothly
C) A and B
D) none of the above
Jayson Company used regression analysis to predict the annual cost of indirect
materials. The results were as follows:
Indirect Materials Cost
Explained by Units Produced
Constant 14,885
Standard error of Y estimate 0.90
R-Squared 0.60
No. of observations 22
Degrees of freedom 20
X Coefficient 0.70
Standard error of coefficient 2.1876
The coefficient of determination is ________.
A) 0.60
B) 0.70
C) 0.90
D) 1.10
California Company reports the following information:
12/31/14 12/31/15
Fixed Assets $330 $581
Less: Accumulated Depreciation (110) (127)
Net Fixed Assets $220 $454
Depreciation expense for the year ending December 31, 2015 is $17. No fixed assets
were sold during 2015. What is the net cash flow from investing activities for the year
ending December 31, 2015?
A) $17 cash inflow
B) $251 cash inflow
C) $251 cash outflow
D) $268 cash outflow
When we use an annual overhead rate consistently throughout the year for product
costing, without altering it month to month, this is called a(n) ________.
A) direct costing system
B) absorption costing system
C) normal costing system
D) constant costing system
________ is (are) the primary consideration in choosing among accounting systems.
A) Simplicity
B) Behavioral implications
C) The cost-benefit balance
D) Simplicity and behavioral implications
Marianne Company reports the following information on December 31, 2011:
Cash $70,000
Accounts receivable 102,000
Accounts payable 71,000
Accrued wages payable 6,000
Unearned revenue 2,000
Paid-in capital 59,000
Retained earnings ?
Inventory 30,000
Prepaid rent 4,000
Equipment (net) 12,000
What is total stockholders’ equity at December 31, 2011?
A) $20,000
B) $80,000
C) $139,000
D) $170,000
The following information was extracted from the accounting records of Brankov
Company:
Beginning Paid-in Capital $90,000
Beginning Retained Earnings $300,000
Beginning Assets $455,000
Contributions by Owners $0
Cash dividends declared $0
Revenues $200,000
Expenses $155,000
At the end of the period, what is the total amount of stockholders’ equity?
A) $65,000
B) $135,000
C) $390,000
D) $435,000
Which of the following explains the change in Retained Earnings from the beginning of
the year to the end of the year?
A) revenues and expenses
B) contributions by owners
C) purchases of inventory
D) a purchase of a plant asset
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
The South and North Divisions are divisions in the same company. Currently the North
Division buys a part from South Division for $384 per unit. The South Division wants
to increase the price of the part it sells to North Division by $96 to $480. The manager
of the North Division has stated that he cannot pay that much insofar as the division’s
profit goes below zero. The manager of the North Division can buy the part from an
outside supplier for $448 per unit. The cost data pertaining to the part is supplied by the
South Division:
Direct materials $136.00
Direct labor 200.00
Variable overhead 40.00
Fixed overhead 38.40
If South Division does not produce the parts for the North Division, it will be able to
avoid one-third of the fixed manufacturing overhead costs. The South Division has
excess capacity but no alternative uses for the facilities. North Division will sell the
finished product with the part (from South Division) for $1,000 after incurring
additional processing costs of $600. What is the maximum transfer price per unit that
North Division should pay for the part?
A) $388.80
B) $400.00
C) $448.00
D) $480.00
When using the Net Present Value model, which of the following assumptions is/are
used?
A) We assume the predicted cash inflows and outflows are certain to occur at the times
specified.
B) We assume perfect capital markets.
C) The Net Present Value model meets the cost-benefit criterion.
D) A and B
In which of the following scenarios can Eastman Company NOT have favorable
flexible budget variance for direct materials?: When direct material price variance is
________, and when direct material quantity variance is ________,
A) favorable; unfavorable
B) unfavorable; favorable
C) unfavorable; unfavorable
D) favorable; favorable
To identify defective products, companies incur inspection costs or ________ costs.
A) prevention
B) appraisal
C) internal failure
D) external failure
Variable costing is also called ________.
A) functional costing
B) indirect costing
C) absorption costing
D) the contribution approach
The Penquin Company has obtained the following data:
Month Indirect Production Costs Direct Labor Hours
July $92,095 4,900
August $105,056 5,480
September $80,000 3,000
October $99,400 4,400
November $110,000 6,000
December $97,404 3,900
Required:
A) Using the high-low method, determine the cost function for the above data. Round
to two decimal places.
B) If direct labor hours equal 10,000, what are the total expected indirect production
costs?
If the contribution margin per unit increases, what is the effect on the break-even point?
(Assume no other changes.)
A) The break-even point increases.
B) The break-even point decreases.
C) The break-even point remains the same.
D) The break-even point will be zero.
Cantrall Company is trying to decide which product to manufacture. Expected direct
materials costs are $4.00 per unit for each product. The expected direct labor costs are
$2.00 per unit for one product and $4.00 per unit for another product. In choosing
between the two products, the direct materials costs are ________ and the direct labor
costs are ________.
A) relevant; irrelevant
B) irrelevant; relevant
C) relevant; relevant
D) irrelevant; irrelevant
Under accrual basis accounting, we record expenses when ________.
A) a company pays cash to a supplier
B) a company incurs a liability
C) a company uses resources
D) a company pays cash to anyone
Stevens Company has two production departments called Assembly and Finishing. The
maintenance department serves both production departments. Maintenance costs are
allocated based on labor hours. Budgeted fixed costs for the maintenance department
are $40,000. Budgeted variable costs for the maintenance department are $4.00 per
labor hour. Other relevant data follow:
Assembly Finishing
Capacity available 18,000 labor hours 12,000 labor hours
Capacity used 15,000 labor hours 9,000 labor hours
Actual maintenance department costs:
Fixed $36,000
Variable $100,000
The amount of fixed maintenance department costs allocated to the Assembly
Department should be ________.
A) $16,000
B) $22,500
C) $24,000
D) $25,000
Differential cost is the difference in ________ between two alternatives.
A) average cost
B) marginal cost
C) median cost
D) total cost
Kulvekowski Company has budgeted sales of $30,000 with the following budgeted
costs:
Direct materials $6,300
Direct labor $4,100
Variable factory overhead $3,700
Fixed factory overhead $5,600
Variable selling and administrative costs $2,400
Fixed selling and administrative costs $3,200
What is the average target markup percentage for setting prices as a percentage of total
costs?
A) 15.7%
B) 18.6%
C) 20.1%
D) none of the above
Summer Company makes three types of products. The company has two types of
customers. The cost to serve all customers is $12,000 and is allocated to customer types
based on the number of manager visits to customer locations. The following data are
available:
Product 1 Product 2 Product 3
Sales $5,000 $6,000 $30,000
Cost of goods sold 4,000 4,800 15,000
Gross margin $1,000 $1,200 $15,000
Customer Type 1 Customer Type 2
Product 1 Sales $500 $4,500
Product 2 Sales $1,000 $5,000
Product 3 Sales $16,000 $14,000
Manager visits 4 16
What is the operating profit (loss) for all three products for Customer Type 2?
A) $(700)
B) $(2,600)
C) $8,450
D) $9,600
The following data points are available. This is an example of a ________ cost.
Units Costs
600 $560
650 $565
800 $580
900 $590
A) variable
B) fixed
C) mixed
D) none of the above