Which of the following sales variances is further analyzed into the market size and
industry volume variances?
A. Quantity
B. Efficiency
C. Mix
D. Activity
Answer:
The labor mix variance is actual total hours at
A. actual mix times actual labor rates less actual total hours at actual mix times standard
labor rates.
B. actual mix times standard labor rates less standard total hours at standard mix times
standard labor rates.
C. actual mix times standard labor rates less actual total hours at standard mix times
standard labor rates.
D. standard mix times standard labor rates less standard total hours at standard mix
times standard labor rates.
Answer:
A company has identified the following overhead costs and cost drivers for the coming
year: (CIA adapted)
Budgeted direct labor cost was $100,000 and budgeted direct material cost was
$280,000. The following information was collected on three jobs that were completed
during the year:
If the company uses traditional costing and allocates overhead using direct labor cost,
what is the cost of each unit of Job 102?
A. $340
B. $392
C. $440
D. $520
Answer:
Long-range planning as a management function is more important
A. at top management levels.
B. at lower management levels.
C. at middle management levels.
D. for staff functions than line functions.
E. for line functions than staff functions.
Answer:
Internal controls include all of the following except:
A. using contingent compensation plans.
B. requiring management authorization for the use of a company’s assets.
C. reconciling various sets of books.
D. requiring employees to take vacations.
Answer:
The Shapely Company uses the high-low method to determine its cost equation. The
following information was gathered for the past year:
What are the direct labor costs per machine hour?
A. $20.00
B. $16.00
C. $14.29
D. $10.00
Answer:
A form prepared periodically for each processing department summarizing (1) the units
for which the department is accountable and the disposition of these units and (2) the
costs charged to the department and the allocation of these costs is called a
A. schedule of Cost of Goods Manufactured.
B. production cost report.
C. job order cost sheet.
D. schedule for Cost of Goods Sold.
Answer:
Which of the following is not a difference between job costing for service firms and
job costing for manufacturing companies?
A. Service firms generally use fewer direct materials that manufacturing companies.
B. Service firms’ overhead accounts have slightly different titles (e.g., Applied Service
Overhead).
C. Service firms’ finished jobs are charged to Cost of Services Billed instead of Cost of
Goods Sold.
D. Service firms’ costs are immediately expensed since all work is completed during a
period.
Answer:
The general principle on setting transfer prices that are in the organization’s best
interests is:
A. outlay cost plus opportunity cost of the resource at the point of transfer.
B. variable costs plus opportunity cost of the resource at the point of transfer.
C. lost contribution margin less the allocated fixed costs for the selling division.
D. gross margin for the buying division plus the gross margin for the selling division.
Answer:
The following information relates to the month of April for The Marilyn
Manufacturing Company, which uses a standard cost accounting system.
Required: (Be sure to indicate whether the variances are favorable or unfavorable.)
a) What is the variable overhead efficiency variance?
b) What is the fixed overhead spending variance?
c) What is the fixed production volume variance?
Answer:
Which of the following is not an alternative name for the production volume variance?
A. capacity variance
B. idle capacity variance
C. denominator variance
D. fixed overhead efficiency variance
Answer:
The following direct labor information pertains to the manufacture of product Glu:
What is the standard direct labor cost per unit of product Glu? (CPA adapted)
A. $30
B. $24
C. $15
D. $12
Answer:
Department D has recently purchased and installed new computerized equipment for
Product X. This equipment will increase the overhead costs by $2,700 and decrease
labor costs (due to time savings) in Department D by $3.00 per case. Machine hours
will not change. If Smelly uses a plantwide rate based on direct labor hours, what is the
revised product cost per case for Product J?
A. $175.33
B. $161.50
C. $169.30
D. $183.36
Answer:
Craddock sells three products. Last month’s results are as follows:
Total fixed costs are $100,000 marketing and $125,000 administrative.
Required:
(a) What was the contribution margin ratio?
(b) What sales volume does Craddock need to achieve a $100,000 monthly profit?
(c) What will profits be if Craddock increases sales by 20%?
Answer:
Demers Products reports the following information about resources. At the beginning
of the year, Demers estimated it would spend $84,000 for setups and $41,000 for
quality testing.
Compute unused resource capacity for quality testing for Demers Products.
A. $4,000
B. $2,000
C. $1,000
D. $5,000
Answer:
TLC Credit, Inc. has $35.0 million in consumer loans with an average interest rate of
12.0%. The bank also has $30.0 million in home equity loans with an average interest
rate of 8.0%. Finally, the bank owns $5.0 million in corporate securities with an average
interest rate of 6%. Next year, consumer loans will increase to $40.0 million because of
a rate decrease to 10.0%, while home equity loans will increase to $32.0 million at an
average interest rate of 6.5%. Unfortunately, the investment in corporate securities will
decrease by 20% and the average interest rate will be only 9.0%. What is TLC’s
estimated change in revenues next year?
A. $460,000 decrease
B. $460,000 increase
C. $700,000 increase
D. $700,000 decrease
Answer:
Terri Martin Nerdmeister, CPA provides bookkeeping and tax services to her clients.
She charges a fee of $60 per hour for bookkeeping and $90 per hour for tax services.
Martin estimates the following costs for the upcoming year:
Operating profits declined last year and Ms. Martin has decided to use activity-based
costing (ABC) procedures to evaluate her hourly fees. She gathered the following
information from last year’s records:
A major client has requested bookkeeping service. However, Martin is already billing
100% of her capacity (i.e., 2,000 hours per year) and would need to shift 100 hours
from her tax services to meet this client’s request. What is the minimum fee per hour
that Martin could charge this client for bookkeeping services and be no worse off than
last year?
A. $48.75
B. $60.00
C. $81.25
D. $90.00
Answer:
A continuous (rolling) budget
A. presents the plan for a range of activity so that the plan can be adjusted for changes
in activity levels.
B. presents a statement of expectations for a period of time but does not present a firm
commitment.
C. presents the plan for only one level of activity and does not adjust to changes in the
level of activity.
D. drops the current month or quarter and adds a future month or quarter as the current
month or quarter is completed.
E. classifies budget requests by activity and estimates the benefits arising from each
activity.
Answer:
Spooner Metalworks Co. has provided the following information for last year:
Required: Calculate the partial productivity for:
a) Metal
b) Labor
Answer:
The ABC Company has three divisions: A Division, B Division, and C Division.
What was C Division’s cost of capital last year?
A. 8%.
B. 12%.
C. 18%.
D. 20%.
Answer:
EM Sales had $2,200,000 in sales last month. The contribution margin ratio was 30%
and operating profits were $180,000. What sales volume does EM’s need to yield a
$240,000 operating profit?
A. $600,000
B. $2,020,000
C. $2,400,000
D. $2,440,000
Answer:
Toledo Shipping, Inc., operates two divisions: (1) a shipping division that owns and
manages bulk carriers on the Great Lakes and (2) a repair division that operates a dry
dock in Port Huron, Michigan. The repair division works on company ships, as well as
other large-hull ships.
The repair division has an estimated variable cost of $45 per labor-hour. The repair
division has a backlog of work for outside ships. They charge $125 per hour for labor &
overhead, which is standard for this type of work. The management division
complained that it could hire its own repair workers for $85 per hour, including leasing
an adequate work area.
Required:
a) What is the minimum transfer price per hour that the repair division should obtain for
its services, assuming it is operating at capacity?
b) What is the maximum transfer price per hour that the shipping division should pay?
c) If the repair division had idle capacity, what is the minimum transfer price that the
repair division should obtain?
Answer:
Which of the following companies would most likely use job costing?
A. Paper manufacturer
B. Paint producer
C. Breakfast cereal maker
D. Advertising agency
Answer:
The operations of Gadwell Corporation are divided into the Blink Division and the
Blur Division. Projections for the next year are as follows:
Operating income for Gadwell Corporation as a whole if the Blur Division were
dropped would be
A. $66,500
B. $56,000
C. $45,500
D. $24,500
Answer:
The Bremmer Company produces 5,000 units of item ZQ98 annually at a total cost of
$200,000.
The Daisy Company has offered to supply all 5,000 units of ZQ98 per year for $35 per
unit. If Bremmer accepts the offer, $8 per unit of the fixed overhead would be saved. In
addition, some of Bremmer’s leased facilities could be vacated, reducing lease payments
by $30,000 per year. At what price would Bremmer be indifferent to Daisy’s offer?
A. $40
B. $38
C. $35
D. $24
Answer:
The following are Mill Co.’s production costs for October:
What amount of costs should be traced to specific products in the production process?
(CPA adapted)
A. $194,000
B. $190,000
C. $100,000
D. $90,000
Answer:
Rogers Company is preparing its annual profit plan. As part of its analysis of the cost
of its purchasing activity, management estimates that the $48,000 for purchasing
support should be assigned to the individual vendors from the information given as
follows:
What is the amount of the purchasing costs that should be allocated to Vendor B
assuming Rogers uses number of shipments received to compute activity-based costs?
A. $9,000
B. $16,000
C. $32,000
D. $39,000
Answer:
Given actual amounts of a semivariable cost for various levels of output, the method
that will always give the most reliable measure of the fixed and variable components is
the
A. high-low method.
B. linear regression method.
C. scattergraph method.
D. account analysis method.
Answer:
Which field of accounting emphasizes relevancy over comparability?
A. Cost accounting.
B. Financial accounting.
C. Responsibility accounting.
D. International accounting.
Answer:
The following selected data were taken from the books of the Bixby Box Company.
The company uses job costing to account for manufacturing costs. The data relate to
June operations.
A) Materials and supplies were requisitioned from the stores clerk as follows:
Job 405, material X, $7,000.
Job 406, material X, $3,000; material Y, $6,000.
Job 407, material X, $7,000; material Y, $3,200.
For general factory use: materials A, B, and C, $2,300.
B) Time tickets for the month were chargeable as follows:
C) Other information:
Factory paychecks for $36,700 were issued during the month.
Various factory overhead charges of $19,400 were incurred on account.
Depreciation of factory equipment for the month was $5,400.
Factory overhead was applied to jobs at the rate of $3.50 per direct labor hour.
Job orders completed during the month: Job 405 and Job 406.
Selling and administrative costs were $2,100.
Factory overhead is closed out only at the end of the year.
The end of the month Work-in-Process Inventory balance would be
A. $18,200.
B. $24,850.
C. $64,100.
D. $88,950.
Answer:
Which of the following transfer pricing methods must be used in segment reporting by
the oil and gas industry?
A. Absorption cost.
B. Differential cost.
C. Negotiated market price.
D. Market price.
Answer:
Misa Corporation manufactures circuit boards and is in the process of preparing next
year’s budget. The pro forma income statement for the current year is presented below.
The contribution margin ratio for the current year is
A. 53.6%
B. 49.3%
C. 46.4%
D. 25%
Answer:
Which of the following statements regarding regression analysis is (are) true?
(A) One way to control the effects of a nonlinear relationship between total costs and
activity is reduce the relevant range.
(B) The linear cost estimate tends to understate the slope of the cost line in ranges close
to capacity.
A. only A is true.
B. only B is true.
C. Both A and B are true.
D. Neither A nor B is true.
Answer:
Additional materials are added in the second department of a four-department
production process. However, this addition does not increase the number of units being
produced in the second department, but will
A. increase the equivalent units of production.
B. increase the total cost per unit.
C. decrease the value of the transferred-in costs.
D. decrease the total costs to account for.
Answer:
How will decreases in the following items affect return on investment (ROI)?
A. a
B. b
C. c
D. d
Answer: