1) One problem with total factor productivity revolves around the measurement of
combined productivity of all inputs.
2) The t-value of a coefficient measures how large the value of the estimated coefficient
is relative to its standard error.
3) In the profit-volume graph the point at which the profit-volume line and x-axis
intersect is the breakeven point.
4) If a managerial accountant suspected his or her immediate superior of unethical
behavior, who happens to be a chief executive officer or equivalent, the managerial
accountant should request an immediate meeting with the executive committee or the
audit committee.
5) The high-low method is more accurate than the regression method of estimating a
cost function.
6) Physical measures such as weight or volume are the best indicators of the benefits
received for allocating joint costs.
7) Predatory pricing occurs when companies in an industry conspire in their pricing and
production decisions to achieve a price above the competitive price and so restrain
trade.
8) The parts of the value chain associated with producing and delivering a product or
serviceproduction and distributionare referred to as the supply chain.
9) Current cost return on investment is a better measure of the current economic returns
from an investment than historical cost return on investment.
10) The three common discounted cash flow methods are net present value, internal rate
of return, and payback.
11) Proration approach has no effect on year-end financial statements.
12) Identifying a company’s most important customers helps to formulate a strategy.
13) As part of the Sarbanes-Oxley Act, internal auditors are solely responsible for the
fair representation of the business operations in the financial statements.
14) A hybrid-costing system is a variant of process-costing that allows it to incorporate
benefits of standard costing and activity-based costing.
15) The optimal safety-stock level is the quantity of safety stock that minimizes the sum
of annual relevant stockout and ordering costs.
16) When machine-hours are used as an overhead cost-allocation base and annual
leasing costs for equipment unexpectedly increase, the most likely result would be to
report a(n) ________.
A) unfavorable variable overhead spending variance
B) favorable variable overhead efficiency variance
C) unfavorable fixed overhead flexible-budget variance
D) favorable production-volume variance
17) A company which favors the residual income approach wants managers to
________.
A) concentrate on maximizing an absolute amount of dollars
B) concentrate on maximizing a percentage return
C) maximize the investment turnover ratio
D) maximize return on sales
18) Costs such as supervision, depreciation, maintenance, supplies, and power. are
included in the ________.
A) capital expenditures budget
B) distribution costs budget
C) revenues budget
D) manufacturing overhead budget
19) Veach Corporation incurred fixed manufacturing costs of $6,000 during 2015. Other
information for 2015 includes:
The budgeted denominator level is 1,000 units.
Units produced total 750 units.
Units sold total 600 units.
Beginning inventory was zero.
The company uses variable costing and the fixed manufacturing cost rate is based on
the budgeted denominator level. Manufacturing variances are closed to cost of goods
sold.
The production-volume variance totals ________.
A) $2,000
B) $1,500
C) $2,400
D) 0
20) At the end of the accounting period, Armstrong Corporation reports operating
income of $30,000. Which of the following statements is true, if Armstrong’s inventory
levels decrease during the accounting period?
A) Variable costing will report less operating income than absorption costing.
B) Absorption costing will report less operating income than variable costing.
C) Variable costing and absorption costing will report the same operating income since
the cost of goods sold is the same.
D) Variable costing and absorption costing will report the same operating income since
the total costs are the same.
21) Customers expect to pay a price that includes ________.
A) the cost of unused capacity
B) only the cost of actual capacity used
C) variable costs but not capacity costs
D) both actual and unused capacity costs
22) Haab Inc. is a merchandising company. Last month the company’s cost of goods
sold was $66,000. The company’s beginning merchandise inventory was $17,000 and
its ending merchandise inventory was $11,000. What was the total amount of the
company’s merchandise purchases for the month?
A) $72,000
B) $66,000
C) $94,000
D) $60,000
23) At the Auric Company, the cost of the personnel department has always been
charged to production departments based upon number of employees. Recently,
opinions gathered from the department managers indicate that the number of new hires
might be a better predictor of personnel costs.
Total personnel department costs are $287,500.
If the number of new hires is considered the cost driver, what amount of personnel costs
will be allocated to Department A?
A) $35,000
B) $10,667
C) $143,750
D) $43,700
24) Coptermagic Company supplies helicopters to corporate clients. Coptermagic has
two sources of funds: long term debt with a market and book value of $32 million
issued at an interest rate of 10%, and equity capital that has a market value of $18
million (book value of $8 million). The cost of equity capital for Coptermagic is 15%,
and its tax rate is 30%. Coptermagic has profit centers in four divisions that operate
autonomously. The company’s results for 2015 are as follows:
Required:
a.Compute Coptermagic’s weighted average cost of capital.
b.Compute each division’s Economic Value Added.
c.Rank the divisions by EVA.
25) Appraisal costs ________.
A) are costs incurred to prevent the production of products that do not conform to
specifications
B) are costs incurred to detect which of the individual units of products do not conform
to specifications
C) are costs incurred on defective products before they are shipped to customers
D) are costs incurred on defective products after they have been shipped to customers
26) Dessa Cabinetry, Inc., manufactures standard sized modular cabinet units for
kitchens and other applications within the home. Its costing system utilizes two cost
categories, direct materials and conversion costs. Each product must pass through the
rough cut department and the finish department. Direct materials are added at the
beginning of production. Conversion costs are allocated evenly throughout production.
Data for Finishing Department for March 2015 are:
Costs for Finishing department for March 2015 are:
How many units were completed and transferred out of the Finishing Department
during March?
A) 1,000 units
B) 1,200 units
C) 1,700 units
D) 2,000 units
27) Craylon Manufacturing produces a single product that sells for $100. Variable costs
per unit equal $25.
The company expects total fixed costs to be $60,000 for the next month at the projected
sales level of 1,000 units. In an attempt to improve performance, management is
considering a number of alternative actions. Each situation is to be evaluated separately.
What is the effect on operating income with the increase of advertising expenses?
A) Operating income will decrease by $10,000.
B) Operating income will increase by $11,000.
C) Operating income will decrease by $18,000.
D) Operating income will increase by $17,000.
28) Which of the following entries is used to record direct materials purchased and used
in production during a month in the Assembly department, before transferring the goods
to Testing department?
A) Work in ProcessAssembly
Wages Payable Control
B) Accounts Payable Control
Work in ProcessAssembly
C) Work in ProcessAssembly
Accounts Payable Control
D) Accounts Payable Control
Cash
29) Which of the following companies is most likely to use process costing?
A) Crimpson Color, a company selling customized garments for niche customers
B) Effel & Associates, a consulting firm providing various audit and related services
C) Red Paste Inc., a company manufacturing and selling toothpaste on a large scale
D) Grimpy Corp., a company manufacturing furniture for customers as per their
requirements
30) Waldorf Company has two sources of funds: long-term debt with a market and book
value of $5 million issued at an interest rate of 12%, and equity capital that has a
market value of $4 million (book value of $2 million). Waldorf Company has profit
centers in the following locations with the following operating incomes, total assets,
and current liabilities. The cost of equity capital is 12%, while the tax rate is 25%.
What is the for St. Louis?
A) $127,870
B) $163,730
C) $196,270
D) $360,000
31) Conformance quality ________.
A) is the first step of a quality management system such as ISO 9000
B) is the performance of a product or service according to design and product
specifications
C) is making the product according to design, engineering, and manufacturing
specifications
D) focuses on how a product meets customer needs and wants